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THE POSTULATES 

OF 

ENGLISH POLITICAL ECONOMY 



< 



THE POSTULATES 

OF 

ENGLISH POLITICAL ECONOMY 



BY THE LATE 

WALTEE BAGEHOT 
n 

M.A. AND FELLOW OF UNIVERSITY COLLEGE, LONDON 



STUDENT'S EDITION 



WITH A PREFACE 

BY 

ALFEED MAESHALL 

PHOFflSSOB OF POLITICAL ECONOMY, CAMBRIDGE 



NEW YORK & LONDON 

G. P. PUTNAM'S SONS 

ffilje Jftmchcxbochtr |)rcss 
1885 



CAfyi 



HBi7i 



f/ ; 



By Transfer from 

U.S. Naval Academy 
Aug. 26 1932 



Press of 

G. P. Putnam's Sons 

New York 



PREFACE. 



Mr. Bagehot left behind him some materials for a 
book which promised to make a landmark in the 
history of economics, by separating the use of the 
older, or Bicardian, economic reasonings from their 
abuse, and freeing them from the discredit into 
which they had fallen through being often mis- 
applied. Unfortunately, he did not complete more 
than the examination of two of their postulates — 
the transferability of labour and capital. But these 
he treated with so much sagacity and suggestiveness 
as to give us great help in dealing with the others, 
and I have long been anxious that what he wrote 
about them should be published in a cheap form, so 
as to have a wide circulation among students. 1 

1 They were originally published in the Fortnightly Review 
in 1876, and are republished with some other materials for the 
great book, as Economic Studies, by the late Walter Bagehot, M.A. 



VI PEEFACE. 

He was excellently qualified for the task he 
undertook. He had a well-trained scientific mind, 
and a large experience of city life. He was an inde- 
pendent thinker, and perfectly free in his criticisms ; 
but he reverenced the great men who had gone 
before him, and knew nothing of the temptation to 
try to raise himself by disparaging them. Though 
he has shown more clearly than perhaps anyone else 
the danger of a careless application of theory, he 
saw with great distinctness the need of its aid in 
dealing with complex economic problems. ' If you 
attempt to solve such problems,' he says, ' without 
some apparatus of method, you are as sure to fail as 
if you try to take a modern military fortress — a Metz 
or a Belfort — by common assault.' 

Perhaps there never was anyone better fitted to 
show the real bearing of Eicardian modes of reason- 
ing on the practical problems of life, or to bring 
out the fundamental unity which, in spite of minor 
differences, connects all the true work of the present 
with that of the earlier generation of economists. 

and Fellow of University College, London, edited by Richard H. 
Hutton. Longmans, 1880. 



PEEFACE. Vll 

And in reading these essays we must remember that 
they deal almost exclusively with one side of what 
he had to say. Here he has explained the danger of 
assuming that the changes which are made quickly 
among modern English business men have been made 
quickly in other places and other times. But what 
he has written proves that had he lived he would 
have thrown much light on the question how the 
rapid changes of modern city life may help us to 
understand, by analogy and indirect inference, the 
slow changes of a backward people. 

ALFRED MARSHALL. 

Cambridge: July 10, 1885. 



CONTENTS. 



PAGE 

THE POSTULATES OF ENGLISH POLITICAL ECONOMY . 1 

I, THE TRANSFERABILITY OF LABOUR . . . 34 

U. THE TRANSFERABILITY OF CAPITAL . . 65 



THE POSTULATES 

OF 

ENGLISH POLITICAL ECONOMY. 



Adam Smith completed the ' Wealth of Nations ' in 
1776, and our English Political Economy is there- 
fore just a hundred years old. In that time it has 
had a wonderful effect. The life of almost everyone 
in England — perhaps of everyone — is different and 
better in consequence of it. The whole commercial 
policy of the country is not so much founded on it as 
instinct with it. Ideas which are paradoxes every- 
where else in the world are accepted axioms here as 
results of it. No other form of political philosophy 
has ever had one thousandth part of the influence on 
us ; its teachings have settled down into the common 
sense of the nation, and have become irreversible. 

We are too familiar with the good we have thus 
acquired to appreciate it properly. To do so we 



2 THE POSTULATES OF 

should see what our ancestors were taught. The 
best book on Political Economy published in England 
before that of Adam Smith is Sir James Steuart's 
' Inquiry,' a book full of acuteness, and written by a 
n of travel and cultivation. And its teaching is 
of this sort : ' In all trade two things are to be con- 
sidered in the commodity sold. The first is the 
matter ; the second is the labour employed to render 
this matter useful. The matter exported from a 
country is what the country loses ; the price of the 
labour exported is what it gains. If the value of the 
matter imported be greater than the value of what 
is exported the country gains. If a greater value of 
labour be imported than exported the country loses. 
Why ? Because in the first case strangers must 
have paid in matter the surplus of labour exported ; 
and in the second place because the strangers must 
have paid to strangers in matter the surplus of labour 
imported. It is, therefore, a general maxim to dis- 
courage the importation of work, and to encourage 
the exportation of it.' 

It was in a world where this was believed that 
our present Political Economy began. 

Abroad the influence of our English system has 
of course not been nearly so great as in England it- 
self. But even there it has had an enormous effect. 



ENGLISH POLITICAL ECONOMY 3 

All the highest financial and commercial legislation 
of the Continent has been founded upon it. As 
curious a testimony perhaps as any to its power is to 
be found in the memoir of Mollien — the financial 
adviser of the first Napoleon, le bon Mollien, whom 
nothing would induce him to discard because his 
administration brought francs, whereas that of his 
more showy competitors might after all end in ideas. 
' It was then,' says Mollien, in giving an account of 
his youth, ' that I read an English book of which 
the disciples whom M. Turgot had left spake with 
the greatest praise — the work of Adam Smith. I 
had especially remarked how warmly the venerable 
and judicious Malesherbes used to speak of it — this 
book so deprecated by all the men of the old routine 
who spoke of themselves so improperly as of the 
school of Colbert. They seemed to have persuaded 
themselves that the most important thing for our 
nation was that not one sou should ever leave France; 
that so long as this was so, the kind and the amount 
of taxation, the rate of wages, the greater or less 
perfection of industrial arts, were things of complete 
indifference, provided always that one Frenchman 
gained what another Frenchman lost.' 

And he describes how the ' Wealth of Nations ' 
led him to abandon those absurdities and to substi- 

B 2 



4 THE POSTULATES OF 

tute the views with which we are now so familiar, 
but on which the ' good Mollien ' dwells as on new 
paradoxes. In cases like this, one instance is worth 
a hundred arguments. We see in a moment the 
sort of effect that our English Political Economy has 
had when we find it guiding the finance of Napoleon, 
who hated ideologues, and who did not love the 
English. 

But notwithstanding these triumphs, the posi- 
tion of our Political Economy is not altogether satis- 
factory. It lies rather dead in the public mind. 
Not only does it not excite the same interest as 
formerly, but there is not exactly the same confidence 
in it. Younger men either do not study it, or do 
not feel that it comes home to them, and that it 
matches with their most living ideas. New sciences 
have come up in the last few years with new 
modes of investigation, and they want to know 
what is the relation of economic science, as their 
fathers held it, to these new thoughts and these new 
instruments. They ask, often hardly knowing it, 
will this ' science ' as it claims to be, harmonise with 
what we now know to be sciences, or bear to be tried 
as we now try sciences ? And they are not sure of 
the answer. 

Abroad, as is natural, the revolt is more avowed. 



ENGLISH POLITICAL ECONOMY 5 

Indeed, though the Political Economy of Adam 
Smith penetrated deep into the Continent, what has 
been added in England since has never penetrated 
equally ; though if our ' science ' is true, the newer 
work required a greater intellectual effort, and is far 
more complete as a scientific achievement than any- 
thing which Adam Smith did himself. Political 
Economy, as it was taught by Ricardo, has had in 
this respect much the same fate as another branch of 
English thought of the same age, with which it has 
many analogies— jurisprudence as it was taught by 
Austin and Bentham; it has remained insular. I 
do not mean that it was not often read and under- 
stood ; of course it was so, though it was often mis- 
read and misunderstood. But it never at all reigned 
abroad as it reigns here; never was really fully 
accepted in other countries as it was here where it 
arose. And no theory, economic or political, can 
now be both insular and secure; foreign thoughts 
come soon and trouble us; there will always be 
doubt here as to what is only believed here. 

There are, no doubt, obvious reasons why Eng- 
lish Political Economy should be thus unpopular out 
of England. It is known everywhere as the theory 
c of Free-trade,' and out of England Free-trade is 
almost everywhere unpopular. Experience shows 



6 THE POSTULATES OF 

that no belief is so difficult to create, and no one so 
easy to disturb. The Protectionist creed rises like a 
weed in every soil. 'Why,' M. Thiers was asked, 
'do you give these bounties to the French sugar- 
refiners ? ' 'I wish,' replied he, ' the tall chimneys 
to smoke.' Every nation wishes prosperity for some 
conspicuous industry. At what cost to the con- 
sumer, by what hardship to less conspicuous indus- 
tries, that prosperity is obtained, it does not care. 
Indeed, it hardly knows, it will never read, it will 
never apprehend the refined reasons which prove 
those evils and show how great they are ; the visible 
picture of the smoking chimneys absorbs the whole 
mind. And, in many cases, the eagerness of Eng- 
land in the Free-trade cause only does that cause 
harm. Foreigners say, 'Your English traders are 
strong and rich ; of course you wish to under-sell 
our traders, who are weak and poor. You have 
invented this Political Economy to enrich yourselves 
and ruin us ; we will see that you shall not do so.' 

And that English Political Economy is more op- 
posed to the action of Government in all ways than 
most such theories, brings it no accession of popu- 
larity. All Governments like to interfere; it ele- 
vates their position to make out that they can cure 
the evils of mankind. And all zealots wish they 



ENGLISH POLITICAL ECONOMY 7 

should interfere, for such zealots think they can and 
may convert the rulers and manipulate the State 
control : it is a distinct object to convert a definite 
man, and if he will not be convinced there is always 
a hope of his successor. But most zealots dislike to 
appeal to the mass of mankind ; they know instinc- 
tively that it will be too opaque and impenetrable 
for them. 

Still I do not believe that these are the only 
reasons why our Eng-lish Political Economy is not 
estimated at its value abroad. I believe that this 
arises from its special characteristic, from that which 
constitutes its peculiar value, and, paradoxical as it 
may seem, I also believe that this same characteristic 
is likewise the reason why it is often not thoroughly 
understood in England itself. The science of Poli- 
tical Economy as we have it in England may be 
defined as the science of business, such as business is 
in large productive and trading communities. It is 
an analysis of that world so familiar to many Eng- 
lishmen — the ' great commerce ' by which England 
has become rich. It assumes the principal facts 
which make that commerce possible, and as is the 
way of an abstract science it isolates and simplifies 
them : it detaches them from the confusion with 
which they are mixed in fact. And it deals too with 



8 THE POSTULATES OF 

the men who carry on that commerce, and who make 
it possible. It assumes a sort of human nature such 
as we see everywhere around us, and again it simpli- 
fies that human nature ; it looks at one part of it 
only. Dealing with matters of ' business,' it assumes 
that man is actuated only by motives of business. 
It assumes that every man who makes anything, 
makes it for money, that he always makes that which 
brings him in most at least cost, and that he will 
make it in the way that will produce most and spend 
least ; it assumes that every man who buys, buys 
with his whole heart, and that he who sells, sells 
with his whole heart, each wanting to gain all pos- 
sible advantage. Of course we know that this is not 
so, that men are not like this ; but we assume it for 
simplicity's sake, as an hypothesis. And this de- 
ceives many excellent people, for from deficient 
education they have very indistinct ideas what an 
abstract science is. 

More competent persons, indeed, have understood 
that English Political Economists are not speaking 
of real men, but of imaginary ones : not of men as 
we see them, but of men as it is convenient to us to 
suppose they are. But even they often do not under- 
stand that the world which our Political Economists 
treat of, is a very limited and peculiar world also. 



ENGLISH POLITICAL ECONOMY 9 

They often imagine that what they read is applicable 
to all states of society, and to all equally, whereas it is 
only true of — and only proved as to — states of society 
in which commerce has largely developed, and where 
it has taken the form of development, or something- 
near the form, which it has taken in England. 

This explains why abroad the science has not 
been well understood. Commerce, as we have it in 
England, is not so full-grown anywhere else as it is- 
here — at any rate, is not so outside the lands popu- 
lated by the Anglo-Saxon race. Here it is not only 
a thing definite and observable, but about the most 
definite thing we have, the thing which it is most 
difficult to help seeing. But on the Continent,, 
though there is much that is like it, and though that 
much is daily growing more, there is nowhere the 
same pervading entity — the same patent, pressing, 
and unmistakable object. 

And this brings out too the inherent difficulty of 
the subject — a difficulty which no other science, I 
think, presents in equal magnitude. Years ago I 
heard Mr. Cobden say at a League Meeting that 
' Political Economy was the highest study of the 
human mind, for that the physical sciences required 
by no means so hard an effort.' An orator cannot 
be expected to be exactly precise, and of course 



10 THE POSTULATES OF 

Political Economy is in no sense the highest study 
of the mind — there are others which are much 
higher, for they are concerned with things much 
nobler than wealth or money ; nor is it true that 
the effort of mind which Political Economy requires 
is nearly as great as that required for the abstruser 
theories of physical science, for the theory of gravi- 
tation, or the theory of natural selection ; but, 
nevertheless, what Mr. Cobden meant had — as was 
usual with his first-hand mind — a great fund of 
truth. He meant that Political Economy — effectual 
Political Economy, Political Economy which in 
complex problems succeeds — is a very difficult thing ; 
something altogether more abstruse and difficult, as 
well as more conclusive, than that which many of 
those who rush in upon it have a notion of. It is 
an abstract science which labours under a special 
hardship. Those who are conversant with its abstrac- 
tions are usually without a true contact with its 
facts ; those who are in contact with its facts have 
usually little sympathy with and little cognisance of 
its abstractions. Literary men who write about it 
are constantly using what a great teacher calls c un- 
real words ' — that is, they are using expressions with 
which they have no complete vivid picture to corre- 
spond. They are like physiologists who have never 



ENGLISH POLITICAL ECONOMY 11 

dissected ; like astronomers who have never seen the 
stars ; and, in consequence, just when they seem to 
be reasoning at their best, their knowledge of the 
facts falls short. Their primitive picture fails them, 
and their deduction altogether misses the mark — 
sometimes, indeed, goes astray so far, that those who 
live and move among the facts boldly say that they 
cannot comprehend ' how any one can talk such non- 
sense.' Yet, on the other hand, these people who live 
and move among the facts often, or mostly, cannot of 
themselves put together any precise reasonings about 
them. Men of business have a solid judgment — a 
wonderful guessing power of what is going to happen 
— each in his own trade ; but they have never prac- 
tised themselves in reasoning out their judgments and 
in supporting their guesses by argument : probably if 
they did so some of the finer and correcter parts of 
their anticipations would vanish. They are like the 
sensible lady to whom Coleridge said, 'Madam, I 
accept your conclusion, but you must let me find 
the logic for it.' Men of business can no more put 
into words much of what guides their life than they 
could tell another person how to speak their language. 
And so the ' theory of business ' leads a life of obstruc- 
tion, because theorists do not see the business, and 
the men of business will not reason out the theories. 



12 THE POSTULATES OF 

Far from wondering that such a science is not com- 
pletely perfect, we should rather wonder that it exists 
at all. 

Something has been done to lessen the difficulty 
by statistics. These give tables of facts which help 
theoretical writers and keep them straight, but the 
cure is not complete. Writers without experience of 
trade are always fancying that these tables mean 
something more than, or something different from, 
that which they really mean. A table of prices, for 
example, seems an easy and simple thing to under- 
stand, and a whole literature of statistics assumes 
that simplicity : but in fact there are many difficulties. 
At the outset there is a difference between the men of 
theory and the; men of practice. Theorists take a 
table of prices as facts settled by unalterable laws ; 
a stockbroker will tell you such prices can be 
' made.' In actual business such is his constant ex- 
pression. If you ask him what is the price of such a 
stock, he will say, if it be a stock at all out of the 
common, ' I do not know, sir : I will go on to the 
market and get them to make me a price.' And the 
following passage from the Report of the late Foreign 
Loans Committee shows what sort of process ' making ' 
a price sometimes is : — ' Immediately,' they say, 
' after the publication of the prospectus ' — the case is 



~^1 



ENGLISH POLITICAL ECONOMY 13 

that of the Honduras Loan — 'and before any allot- 
ment was made, M. Lefevre authorised extensive pur- 
chases and sales of loans on his behalf, brokers were 
employed by him to deal in the manner best calculated 
to maintain the price of the stock ; the brokers so 
employed instructed jobbers to purchase the stock 
when the market required to be strengthened, and to 
sell it if the market was sufficiently firm. In conse- 
quence of the market thus created dealings were car- 
ried on to a very large amount. Fifty or a hundred 
men were in the market dealing with each other and 
the brokers all round. One jobber had sold the loan 
(2,500,0002.) once over.' 

Much money was thus abstracted from credulous 
rural investors ; and I regret to say that book statists 
are often equally, though less hurtfully, deceived. 
They make tables in which artificial prices run side 
by side with natural ones ; in which the price of an 
article like Honduras scrip, which can be indefinitely 
manipulated, is treated just like the price of Consols, 
which can scarcely be manipulated at all. In most 
cases it never occurs to the maker of the table that 
there could be such a thing as an artificial — a mold 
fide — price at all. He imagines all prices to be 
equally straightforward. Perhaps, however, this may 
be said to be an unfair sample of price difficulties, 



14 THE POSTULATES OF 

because it is drawn from the Stock Exchange, the 
most complex market for prices ; — and no doubt the 
Stock Exchange has its peculiar difficulties, of which 
I certainly shall not speak lightly • but on the other 
hand, in one cardinal respect, it is the simplest of 
markets. There is no question in it of the physical 
quality of commodities : one Turkish bond of 1858 
is as good or bad as another ; one ordinary share in 
a railway exactly the same as any other ordinary 
share ; but in other markets each sample differs in 
quality, and it is a learning in each market to judge 
of qualities, so many are they, and so fine their gra- 
dations. Yet mere tables do not tell tins, and cannot 
tell it. Accordingly in a hundred cases you may 
see c prices ' compared as if they were prices of the 
same thing, when, in fact, they are prices of different 
things. The Gazette average of corn is thus com- 
pared incessantly, yet it is hardly the price of the 
same exact quality of corn in any two years. It is 
an average of all the prices in all the sales in all the 
markets. But this year the kind of corn mostly sold 
may be very superior, and last year very inferior — 
yet the tables compare the two without noticing the 
difficulty. And when the range of prices runs over 
many years, the figures are even more treacherous, 
for the names remain, while the quality, the thing 



ENGLISH POLITICAL ECONOMY 15 

signified, is changed. And of this persons not 
engaged in business have no warning. Statistical 
tables, even those which are most elaborate and care- 
ful, are not substitutes for an actual cognisance of 
the facts : they do not, as a rule, convey a just idea 
of the movements of a trade to persons not in the 
trade. 

It will be asked, why do you frame such a science 
if from its nature it is so difficult to frame it ? The 
answer is that it is necessary to frame it, or we must 
go without important knowledge. The facts of .com- 
merce, especially of ' the great commerce,' are very 
complex. Some of the most important are not on 
the surface ; some of those most likely to confuse are 
on the surface. If you attempt to solve such pro- 
blems without some apparatus of method, you are as 
sure to fail as if you try to take a modern military 
fortress — a Metz or a Belfort — by common assault ; 
you must have guns to attack the one, and method 
to attack the other. 

The way to be sure of this is to take a few new 
problems, such as are for ever presented by investi- 
gation and life, and to see what by mere common 
sense we can make of them. For example, it is said 
that the general productiveness of the earth is less 
or more in certain regular cycles, corresponding with 



16 THE POSTULATES OF 

perceived changes in the state of the sun, — what 
would be the effect of this cyclical variation in the 
efficiency of industry upon commerce ? Some hold, 
and as I think hold justly, that, extraordinary as it 
may seem, these regular changes in the sun have 
much to do with the regular recurrence of difficult 
times in the money market. What common sense 
would be able to answer these questions ? Yet we 
may be sure that if there be a periodical series of 
changes in the yielding power of this planet, that 
series will have many consequences on the industry 
of men, whether those which have been suggested or 
others. 

Or to take an easier case, who can tell without 
instruction what is likely to be the effect of the new 
loans of England to foreign nations ? We press 
upon half-finished and half-civilised communities 
incalculable sums ; we are to them what the London 
money-dealers are to students at Oxford and Cam- 
bridge. We enable these communities to read in 
every newspaper that they can have ready money, 
almost of any amount, on ' personal security.' No 
incipient and no arrested civilisations ever had this 
facility before. What will be the effect on such 
civilisations now, no untutored mind can say. 

Or ao-ain : since the Franco-German War an 



ENGLISH POLITICAL ECONOMY 17 

immense sum of new money has come to England ; 
England has become the settling-place of inter- 
national bargains much more than it was before ; but 
whose mind could divine the effect of such a change 
as this, except it had a professed science to help it ? 

There are indeed two suggested modes of in- 
vestigation, besides our English Political Economy, 
and competing with it. One is the Enumerative, or, 
if I may coin such a word, the ' All-case method.' 
One school of theorists say, or assume oftener than 
they say, that you should have a ' complete experi- 
ence;' that you should accumulate all the facts of 
these subjects before you begin to reason. A very 
able German writer has said, in the ' Fortnightly 
Review,' l of a great economical topic, banking, — ' I 
venture to suggest that there is but one way of 
arriving at such knowledge and truth' — that is 
absolute truth and full knowledge — ' namely, a 
thorough investigation of the facts of the case. By 
the facts, I mean not merely such facts as present 
themselves to so-called practical men in the common 
routine of business, but the facts which a complete 
historical and statistical inquiry would develop. When 
such a work shall have been accomplished, German 
economists may boast of having restored the prin- 
1 Fortnightly Review for September 1873. 

C 



18 THE POSTULATES OF 

ciples of banking, that is to say, of German banking, 
but not even then of banking in general. To set forth 
principles of banking in general, it will be necessary 
to master in the same way the facts of English, 
Scotch, French, and American banking, in short, of 
every country where banking exists.' ' The only,' 
he afterwards continues, 'but let us add also, the 
safe ground of hope for political economy, is, fol- 
lowing Bacon's exhortation, to recommence afresh 
the whole work of economic inquiry. In what con- 
dition would chemistry, physics, geology, zoology be, 
and the other branches of natural science which have 
yielded such prodigious results, if their students had 
been linked to their chains of deduction from the as- 
sumptions and speculations of the last century ? ' 

But the reply is that the method which Mr. Cohn 
suggests was tried in physical science and failed. 
And it is very remarkable that he should not have 
remembered it as he speaks of Lord Bacon, for the 
method which he suggests is exactly that which Lord 
Bacon himself followed, and owing to the mistaken 
nature of which he discovered nothing. The in- 
vestigation into the nature of heat in the Novum 
Organum is exactly such a collection of facts as Mr. 
Cohn suggests, — but nothing comes of it. As Mr. 
Jevons well says, ' Lord Bacon's notion of scientific 



ENGLISH POLITICAL ECONOMY 19 

method was that of a kind of scientific book-keeping. 
Facts were to be indiscriminately gathered from 
every source, and posted in a kind of ledger from 
which would emerge in time a clear balance of truth. 
It is difficult to imagine a less likely way of arriving 
at discoveries.' And yet it is precisely that from 
which, mentioning Bacon's name, but not forewarned 
by his experience, Mr. Oohn hopes to make them. 

The real plan that has answered in physical 
science is much simpler. The discovery of a law of 
nature is very like the discovery of a murder. In 
the one case you arrest a suspected person, and in 
the other you isolate a suspected cause. When 
Newton, by the fall of the apple, or something else, 
was led to think that the attraction of gravitation 
would account for the planetary motions, he took 
that cause by itself, traced out its effects by abstract 
mathematics, and so to say, found it ' guilty,' — he dis- 
covered that it would produce the phenomenon under 
investigation. In the same way Geology has been re- 
volutionised in our own time by Sir Charles Lyell. He 
for the first time considered the effects of one particular 
set of causes by themselves. He showed how large 
a body of facts could be explained on the hypothesis 
' that the forces now operating upon and beneath the 
earth's surface are the same both in kind and degree 

c 2 



20 THE POSTULATES OF 

as those which, at remote epochs, have worked out 
geological changes.' He did not wait to begin his 
inquiry till his data about all kinds of strata, or even 
about any particular kind, were complete ; he took 
palpable causes as he knew them, and showed how 
many facts they would explain; he spent a long and 
most important life in fitting new facts into an ab- 
stract and youthful speculation. Just so in an in- 
stance which has made a literature and gone the round 
of the world. Mr. Darwin, who is a disciple of Lyell, 
has shown how one vera causa, l natural selection,' 
would account for an immense number of the facts of 
nature ; for how many, no doubt, is controverted, but, 
as is admitted, for a very large number. And this he 
showed by very difficult pieces of reasoning which very 
few persons would have thought of, and which most 
people found at first not at all easy to comprehend. 
The process by which physical science has become 
what it is, has not been that of discarding abstract 
speculations, but of working out abstract specula- 
tions. The most important known laws of nature — 
the laws of motion — the basis of the figures in the 
' Nautical Almanack ' by which every ship sails, — are 
difficult and abstract enough, as most of us found to 
our cost in our youth. 

There is no doubt a strong tendency to revolt 



ENGLISH POLITICAL ECONOMY 21 

against abstract reasoning. Human nature has a 
strong ' factish ' element in it. The reasonings of the 
Principia are now accepted. But in the beginning 
they were ' mere crotchets of Mr. Newton's ; ' Flam- 
stead, the greatest astronomical discoverer of his day 
— the man of facts, par excellence — so called them ; 
they have irresistibly conquered ; but at first even 
those most conversant with the matter did not 
believe them. I do not claim for the conclusions of 
English Political Economy the same certainty as for 
the ' laws of motion.' But I say that the method by 
which they have been obtained is the same, and that 
the difference in the success of the two investigations 
largely comes from this — that the laws of wealth are 
the laws of a most complex phenomenon which you 
can but passively observe, and on which you cannot 
try experiments for science' sake, and that the laws 
of motion relate to a matter on which you can 
experiment, and which is comparatively simple in 
itself. 

And to carry the war into the enemy's country, 
I say also that the method proposed by Mr. Cohn, the 
' all case ' method is impossible. When I read the 
words { all the facts of English banking,' I cannot but 
ask of what facts is Mr. Cohn thinking. Banking in 
England goes on growing, multiplying, and changing, 



22 THE POSTULATES OF 

as the English, people itself goes on growing, multiply- 
ing, and changing. The facts of it are one thing to-day 
and another to-morrow; nor at one moment does any 
one know them completely. Those who best know 
many of them will not tell them or hint at them ; gradu- 
ally and in the course of years they separately come to 
light, and by the time they do so, for the most part, 
another crop of unknown ones has accumulated. If 
we wait to reason till the ' facts ' are complete, we 
shall wait till the human race has expired. I think 
that Mr. Cohn, and those who think with him, are 
too ' bookish ' in this matter. They mean by having 
all the ' facts ' before them, having all the printed 
facts, all the statistical tables. But what has been said 
of Nature is true of Commerce. ' Nature,' says Sir 
Charles Lyell, ' has made it no part of her concern to 
provide a record of her operations for the use of men ; ' 
nor does trade either — only the smallest of fractions 
of actual transactions is set down so that investigation 
can use it. Literature has been called the ' fragment 
of fragments,' and in the same way statistics are the 
1 scrap of scraps.' In real life scarcely any one knows 
more than a small part of what his neighbour is doing, 
and he scarcely makes public any of that little, or of 
what he does himself. A complete record of commer- 
cial facts, or even of one kind of such facts, is the 



ENGLISH POLITICAL ECONOMY 25 

completest of dreams. You might as well hope for 
an entire record of human conversation. 

There is also a second antagonistic method to that 
of English Political Economy, which, by contrast, I 
will call the ' single case ' method. It is said that 
you should analyse each group of facts separately — 
that you should take the panic of 1866 separately, 
and explain it ; or, at any rate, the whole history of 
Lombard Street separately, and explain it. And this 
is very good and very important ; but it is no 
substitute for a preliminary theory. You might as 
well try to substitute a corollary for the proposition 
on which it depends. The history of a panic is the 
history of a confused conflict of many causes ; and 
unless you know what sort of effect each cause is 
likely to produce, you cannot explain any part of 
what happens. It is trying to explain the bursting 
of a boiler without knoAving the theory of steam. Any 
history of similar phenomena like those of Lombard 
Street could not be usefully told, unless there was a 
considerable accumulation of applicable doctrine 
before existing. You might as well try to write the 
' life ' of a ship, making as you went along the theory 
of naval construction. Clumsy dissertations would 
run all over the narrative and the result would be 
a perfect puzzle. 



24 THE POSTULATES OF 

I have been careful not to use in this discussion 
of methods the phrase which is often est used, viz., 
the Historical method, because there is an excessive 
ambiguity in it. Sometimes it seems what I have 
called the Enumerative, or, ' all case ' method ; some- 
times the ' single case ' method ; a most confusing 
double meaning, for by the mixture of the two the 
mind is prevented from seeing the defects of either. 
And sometimes it has other meanings, with which, 
as I shall show, I have no quarrel, but rather much 
sympathy. Rightly conceived, the Historical method 
is no rival to the abstract method rightly conceived. 

This conclusion is confirmed by a curious circum- 
stance. At the very moment that our Political 
Economy is objected to in some quarters as too ab- 
stract, in others an attempt is made to substitute for 
it one which is more abstract still. Mr. Stanley 
Jevons, and M. Walras, of Lausanne, without com- 
munication, and almost simultaneously, have worked 
out a ' mathematical ' theory of Political Economy \ — 
and any one who thinks what is ordinarily taught in 
England objectionable, because it is too little con- 
crete in its method, and looks too unlike life and 
business, had better try the new doctrine, which he 
will find to be much worse on these points than the 
old. 



ENGLISH POLITICAL ECONOMY 25 

But I shall be asked, Do you then say that 
English Political Economy is perfect ? — surely it is 
contrary to reason that so much difficulty should 
be felt in accepting a real science properly treated ? 
At the first beginning no doubt there are difficulties 
in gaining a hearing for all sciences, but English 
Political Economy has long passed out of its first 
beginning ? Surely, if there were not some intrinsic 
defect, it would have been firmly and coherently 
established, just as others are ? 

In this reasoning there is evident plausibility, 
and I answer that, in my judgment, there are three 
defects in the mode in which Political Economy has 
been treated in England, which have prevented 
people from seeing what it really is, and from prizing 
it at its proper value. 

First, — It has often been put forward, not as a 
theory of the principal causes affecting wealth in 
certain societies, but as a theory of the principal,, 
sometimes even of all, the causes affecting wealth in 
every society. And this has occasioned many and 
strong doubts about it. Travellers fresh from the 
sight, and historians fresh from the study, of peculiar 
and various states of society, look with dislike and 
disbelief on a single set of abstract propositions 
which claim, as they think, to be applicable to all 



26 THE POSTULATES OF 

such societies, and to explain a most important part 
of most of them. I cannot here pause to say how 
far particular English Economists have justified this 
accusation ; I only say that, taking the whole body 
of them, there is much ground for it, and that in 
almost every one of them there is some ground. No 
doubt almost every one — every one of importance — 
has admitted that there is a ' friction ' in society 
which counteracts the effect of the causes treated of. 
But in general they leave their readers with the 
idea that, after all, this friction is but subordinate ; 
that probably in the course of years it may be 
neglected; and, at any rate, that the causes assigned 
in the science of Political Economy, as they treat it, 
are the main and principal ones. Now I hold that 
these causes are only the main ones in a single kind 
of society — a society of grown-up competitive com- 
merce, such as we have in England ; that it is only 
in such societies that the other and counteracting 
forces can be set together under the minor head of 
' friction ; ' but that in other societies these other 
causes — in some cases one, and in some another — 
are the most effective ones, and that the greatest 
confusion arises if you try to fit on w?i-economic 
societies the theories only true of, and only proved 
as to, economic ones. In my judgment, we need— 



ENGLISH POLITICAL ECONOMY 27 

not that the authority of our Political Economy 
should be impugned, but that it should be minimised ; 
that we should realise distinctly where it is estab- 
lished, and where not ; that its sovereignty should 
be upheld, but its frontiers marked. And until this 
is done, I am sure that there will remain the same 
doubt and hesitation in many minds about the science 
that there is now. 

Secondly, — I think in consequence of this defect 
of conception Economists have been far more abstract, 
and in consequence much more dry, than they need 
have been. If they had distinctly set before them- 
selves that they were dealing only with the causes of 
wealth in a single set of societies, they might have 
effectively pointed their doctrines with facts from 
those societies. But, so long as the vision of universal 
theory vaguely floated before them, they shrank from 
particular illustrations. Real societies are plainly so 
many and so unlike, that an instance from one kind 
does not show that the same thing exists in other 
societies ; — it rather raises in the mind a presumption 
that it does not exist there ; and therefore speculators 
aiming at an all-embracing doctrine refrain from 
telling cases, because those cases are apt to work in 
unexpected ways, and to raise up the image not only 
of the societies in which the tenet illustrated is 



28 THE POSTULATES OF 

true, but also of the opposite group in which, it is 
false. 

Thirdly, — It is also in consequence, as I imagine, 
of this defective conception of their science, that 
English Economists have not been so fertile as they 
should have been in verifying it. They have been 
too content to remain in the ' abstract,' and to shrink 
from concrete notions, because they could not but 
feel that many of the most obvious phenomena of 
many nations did not look much like their abstrac- 
tions. Whereas in the societies with which the 
science is really concerned, an almost infinite harvest 
of verification was close at hand, ready to be gathered 
in ; and because it has not been used, much con- 
fidence in the science has been lost, and it is thought 
' to be like the stars which give no good light because 
they are so high.' 

Of course this reasoning implies that the bounda- 
ries of this sort of Political Economy are arbitrary, 
and might be fixed here or there. But this is already 
implied when it is said that Political Economy is an 
abstract science. All abstractions are arbitrary ; they 
are more or less convenient fictions made by the 
mind for its own purposes. An abstract idea means a 
concrete fact or set of facts minus something thrown 
away. The fact or set of facts were made by nature ; 



ENGLISH POLITICAL ECONOMY 29 

but how much you will throw aside of them and how 
much you will keep for consideration you settle for 
yourself. There may be any number of political 
economies according as the subject is divided off in 
one way or in another, and in this way all may be 
useful if they do not interfere with one another, or 
attempt to rule further than they are proved. 

The particular Political Economy which I have 
been calling the English Political Economy is that 
of which the first beginning was made by Adam 
Smith. But what he did was much like the rough 
view of the first traveller who discovers a country ; 
he saw some great outlines well, but he mistook 
others and left out much. It was Ricardo who made 
the first map ; who reduced the subjects into con- 
secutive shape, and constructed what you can call a 
science. Few greater efforts of mind have been 
made, and not many have had greater fruits. From 
Ricardo the science passed to a whole set of minds 
— James Mill, Senior, Torrens, Macculloch, and 
others, who busied themselves with working out his 
ideas, with elaborating and with completing them. 
For five-and-twenty years the English world was 
full of such discussions. Then Mr. J. S. Mill — the 
Mr. Mill whom the present generation know so well, 
and who has had so much influence,-- -shaped with 



30 THE POSTULATES OF 

masterly literary skill tlie confused substance of 
those discussions into a compact whole. He did not 
add a great deal which was his own, and some of 
what is due to him does not seem to me of great 
value. But he pieced the subjects together, showed 
where what one of his predecessors had done had 
fitted on to that of another, and adjusted this science 
to other sciences according to the notions of that 
time. To many students his book is the Alpha and 
Omega of Political Economy ; they know little of 
what was before, and imagine little which can come 
after in the way of improvement. But it is not 
given to any writer to occupy such a place. Mr. Mill 
would have been the last to claim it for himself. He 
well knew that, taking his own treatise as the 
standard, what he added to Political Economy was 
not a ninth of what was due to Ricardo, and that for 
much of what is new in his book he was rather the 
Secretaire de la Redaction, expressing and formu- 
lating the current views of a certain world, than 
producing by original thought from his own braiu. 
And his remoteness from mercantile life, and I 
should say his enthusiastic character, eager after 
things far less sublunary than money, made him 
little likely to give finishing touches to a theory of 
' the great commerce.' In fact he has not done so - 



ENGLISH POLITICAL ECONOMY 31 

much yet remains to be done in it as in all sciences. 
Mr. Mill, too, seems to me open to the charge of 
having widened the old Political Economy either too 
much or not enough. If it be, as I hold, a theory 
proved of, and applicable to, particular societies only, 
much of what is contained in Mr. Mill's book should 
not be there ; if it is, on the contrary, a theory holding 
good for all societies, as far as they are concerned 
with wealth, much more ought to be there, and 
much which is there should be guarded and limited. 
English Political Economy is not a finished and com- 
pleted theor3 r , but the first lines of a great analysis 
Avhich has worked out much, but which still leaves 
much unsettled and unexplained. 

There is nothing capricious, we should observe, 
in this conception of Political Economy, nor, though 
it originated in England, is there anything specially 
English in it. It is the theory of commerce, as 
commerce tends more and more to be when capital 
increases and competition grows. England was the 
first — or one of the first — countries to display these 
characteristics in such vigour and so isolated as to 
suggest a separate analysis of them, but as the 
world goes on, similar characteristics are being 
evolved in one society after another. A similar 
money market, a similar competing trade based on 



32 THE POSTULATES OF 

large capital, gradually tends to arise in all countries. 
As ' men of the world ' are the same everywhere, 
so ' the great commerce ' is the same everywhere. 
Local peculiarities aud ancient modifying circum- 
stances fall away in both cases ; and it is of this one 
and uniform commerce which grows daily, and which 
will grow, according to every probability, more and 
more, that English Political Economy aspires to be 
the explanation. 

And our Political Economy does not profess to 
prove this growing world to be a good world — far 
less to be the best. Abroad the necessity of con- 
testing socialism has made some writers use the 
conclusions brought out by our English science for 
that object. But the aim of that science is far more 
humble ; it says these and these forces produce these 
and these effects, and there it stops. It does not 
profess to give a moral judgment on either ; it 
leaves it for a higher science, and one yet more 
difficult, to pronounce what ought and what ought 
not to be. 

The first thing to be done for English Political 
Economy, as I hold, is to put its aim right. So long- 
as writers on it do not clearly see, and as readers do 
not at all see, the limits of what they are analysing, 
the result will not satisfy either. The science will 



ENGLISH POLITICAL ECONOMY 33 

continue to seem what to many minds it seems now, 
proved perhaps, but proved in nubibus ; true, no 
doubt, somehow and somewhere, but that somewhere 
a terra incognita, and that somehow an unknown 
quantity. — As a help in this matter I propose to take 
the principal assumptions of Political Economy one 
by one, and to show, not exhaustively, for that would 
require a long work, but roughly, where each is true 
and where it is not. We shall then find that our 
Political Economy is not a questionable thing of 
unlimited extent, but a most certain and useful thing 
of limited extent. By marking the frontier of our 
property we shall learn its use, and we shall have a 
positive and reliable basis for estimating its value. 



34: THE POSTULATES OF 



I. 

THE TRANSFERABILITY OF LABOUR. 

The first assumption which I shall take is that 
which is perhaps often er made in our economic 
reasonings than any other, namely, that labour (mas- 
culine labour, I mean) and capital circulate readily 
within the limits of a nation from employment to 
employment, leaving that in which the remuneration 
is smaller and going to that in which it is greater. 
No assumption can be better founded, as respects 
such a country as England, in such an economic 
state as our present one. A rise in the profits of 
capital, in any trade, brings more capital to it with 
us now-a-days — I do not say quickly, for that would 
be too feeble a word, but almost instantaneously. If, 
owing to a high price of corn, the corn trade on a 
sudden becomes more profitable than usual, the bill- 
cases of bill-brokers and bankers are in a few days 
stuffed with corn-bills — that is to say, the free 
capital of the country is by the lending capitalists, 



ENGLISH POLITICAL ECONOMY 35 

the bankers and bill-brokers, transmitted where it is 
most wanted. When the price of coal and iron rose 
rapidly a few years since, so much capital was found 
to open new mines and to erect new furnaces that 
the profits of the coal and iron trades have not yet 
recovered it. In this case the influence of capital 
attracted by high profits was not only adequate but 
much more than adequate : instead of reducing these 
profits only to an average level, it reduced them below 
that level ; and this happens commonly, for the 
speculative enterprise which brings in the new capital 
is a strong, eager, and rushing force, and rarely stops 
exactly where it should. Here and now a craving for 
capital in a trade is almost as sure to be followed by 
a plethora of it as winter to be followed by summer. 
Labour does not flow so quickly from pursuit to 
pursuit, for man is not so easily moved as money — 
but still it moves very quickly. Patent statistical 
facts show what we may call 'the tides' of our 
people. Between the years shown by the last census, 
the years 1861 and 1871, the population of 

The Northern counties increased 23 per cent. 
Yorkshire „ 19 n 

North-Western counties „ 14 „ 
London „ 16 



36 THE POSTULATES OF 

While that of 

The South-Western counties only increased 2 per cent. 
Eastern „ „ 7 „ 

North Midland „ „ 9 „ 

— though the fertility of marriages is equal. The 
set of labour is steadily and rapidly from the counties 
where there is only agriculture and little to be made 
of new labour, towards those where there are many 
employments and where much is to be made 
of it. 

No doubt there are, even at present in England, 
many limitations to this tendency, both of capital 
and of labour, which are of various degrees of im- 
portance, and which need to be considered for various 
purposes. There is a ' friction,' but still it is only a 
' friction ; ' its resisting power is mostly defeated, and 
at a 'first view need not be regarded. But taking the 
world, present and past, as a whole, the exact con- 
trary is true ; in most ages and countries this tendency 
has been not victorious but defeated ; in some cases, 
it can scarcely be said even to have existed, much 
less to have conquered. If you take at random a 
country in history, the immense chances are that 
you will find this tendency either to be altogether 
absent, or not at all to prevail as it does with us now. 
This primary assumption of our Political Economy is 



ENGLISH POLITICAL ECONOMY 37 

not true everywhere and always, but only in a few 
places and a few times. 

The truth of it depends on the existence of con- 
ditions which, taken together, are rarely satisfied. 
Let us take labour first, as it is the older and 
simpler of the two. First, there must be ' employ- 
ments ' between which labour is to migrate ; and 
this is not true at all of the primitive states of 
society. We are used to a society which abounds 
in felt wants that it can satisfy, and where there 
are settled combinations of men — trades, as we call 
them — each solely occupied in satisfying some one 
of them. But in primitive times nothing at all like 
this exists. The conscious wants of men are few, 
the means of supplying them still fewer, and the 
whole society homogeneous — one man living much 
as another. Civilisation is a shifting mixture of 
many colours, but barbarism was and is of a dull 
monotony, hardly varying even in shade. 

A picture or two of savage tribes brings this 
home to the mind better than abstract words. Let 
us hear Mr. Catlin's description of a favourite North 
American tribe, with which he means us to be much 
pleased: — 'The Mandans, like all other tribes, live 
lives of idleness and leisure, and of course devote a 
great deal of time to their amusements, of which 



38 THE POSTULATES OF 

they have a great variety. Of these dancing is one 
of the principal, and may be seen in a variety of 
forms : such as the buffalo dance, the boasting dance, 
the begging dance, the scalp dance, and a dozen other 
dances, all of which have their peculiar characters 
and meanings and objects.' 

Then he describes the 'starts and jumps' of 
these dances and goes on : — ' Buffaloes, it is well 
known, are a sort of roaming creatures congregating 
occasionally in huge masses, and strolling away about 
the country from east to west or from north to south, 
or just where their whims or fancies may lead them; 
and the Mandans are sometimes by this means most 
unceremoniously left without anything to eat, and 
being a small tribe and unwilling to risk their lives 
by going far from home in the face of their more 
powerful enemies, are oftentimes left almost in a 
state of starvation. In any emergency of this kind 
every man musters and brings out of his lodge his 
mask (the skin of a buffalo's head with the horns on), 
which he is obliged to keep in readiness for the 
occasion ; and then commences the buffalo dance of 
which I have spoken, which is held for the purpose 
of making "buffalo come," as they term it — of in- 
ducing the buffalo herds to change the direction of 
their wanderings, and bend their course towards the 



ENGLISH POLITICAL ECONOMY 39 

Man dan village and graze about on the beautiful hills 
and bluffs in its vicinity, where the Mandans can 
shoot them down and cook them as they want them 
for food. For the most part of the year the young 
warriors and hunters by riding out a mile or two 
from the village can kill meat in abundance ; and 
sometimes large herds of these animals may be seen 
grazing in full view of the village. There are other 
seasons also when the young men have ranged about 
the country, as far as they are willing to risk their 
lives on account of their enemies, without finding 
meat. This sad intelligence is brought back to the 
chiefs and doctors, who sit in solemn council and 
consult on the most expedient measures to be taken 
until they are sure to decide the old and only ex- 
pedient " which has never failed." This is the buffalo 
dance, which is incessantly continued till " buffalo 
come," and which the whole village by relays of 
dancers keeps up in succession. And when the buffa- 
loes are seen, there is a brisk preparation for the 
chase — a great hunt takes place. The choicest 
pieces of the carcase are sacrificed to the Great 
Spirit, and then a surfeit or a carouse. These dances 
have sometimes been continued for two or three 
weeks until the joyful moment when buffaloes made 



40 THE POSTULATES OF 

their appearance. And so they " never fail" as the 
village thinks, to bring the buffaloes in.' 

Such is the mode of gaining the main source of 
existence, without which the tribe would starve. 
And as to the rest we are told : — ' The principal 
occupations of the women in this village consist in 
procuring wood and water, in cooking, dressing 
robes and other skins, in drying meat and wild fruits, 
and raising maize.' 

In this attractive description there is hardly any 
mention of male labour at all ; the men hunt, fight, 
and amuse themselves, and the women do all the rest. 

And in the lowest form of savage life, in the stone 
age, the social structure must have been still more 
uniform, for there were still less means to break or 
vary it. The number of things which can be made 
with a flint implement is much greater than one would 
have imagined, and savages made more things with 
it than anyone would make now. Time is nothing 
in the savage state, and protracted labour, even with 
the worst instrument, achieves much, especially 
when there are no other means of achieving anything. 
But there is no formal division of employments — no 
cotton trade, no iron trade, no woollen trade. There 
are beginnings of a division, of course, but as a rule, 
everyone does what he can at everything. 



ENGLISH POLITICAL ECONOMY 41 

In much later times the same uniformity in the 
structure of society still continues. We all know 
from childhood how simple is the constitution of a 
pastoral society. As we see it in the Pentateuch it 
consists of one family, or a group of families, possess- 
ing flocks and herds, on which, and by which, they 
live. They have no competing employments; no 
alternative pursuits. What manufactures there are 
are domestic, are the work of women at all times, 
and of men, of certain men, at spare times. No 
circulation of labour is then conceivable, for there is 
no circle ; there is no group of trades round which 
to go, for the whole of industry is one trade. 

Many agricultural communities are exactly 
similar. The pastoral communities have left the life 
of movement, which is essential to a subsistence on 
the flocks and herds, and have fixed themselves on 
the soil. But they have hardly done more than 
change one sort of uniformity for another. They 
have become peasant proprietors — combining into a 
village, and holding more or less their land in 
common, but having no pursuit worth mentioning, 
except tillage. The whole of their industrial energy 
— domestic clothes-making and similar things ex- 
cepted— is absorbed in that. 

No doubt in happy communities a division of 



42 THE POSTULATES OF 

labour very soon and very naturally arises, and at 
first sight we might expect that with it a circulation 
of labour would begin too. But an examination of 
primitive society does not confirm this idea ; on the 
contrary, it shows that a main object of the social 
organisation which then exists, is to impede or pre- 
vent that circulation. And upon a little thought 
the reason is evident. There is no paradox in the 
notion ; early nations were not giving up an ad- 
vantage which they might have had; the good 
which we enjoy from the circulation of labour was 
unattainable by them ; all they could do was to 
provide a substitute for it — a means of enjoying the 
advantages of the division of labour without it, — 
and this they did. We must carry back our minds 
to the circumstances of primitive society before we 
can comprehend the difficulty under which they 
laboured, and see how entirely it differs from any 
which we have to meet now. 

A free circulation of labour from employment 
to employment involves an incessant competition 
between man and man, which causes constant 
quarrels, — some of which, as we see in the daily 
transactions of trades unions, easily run into vio- 
lence ; and also a constant series of new bargains, 
one differing from another, some of which are sure 



ENGLISH POLITICAL ECONOMY 43 

to be broken, or said to be so, which makes disputes 
of another kind. The peace of society was exposed 
in early times to greater danger from this source 
than now, because the passions of men were then 
less under control than now. ' In the simple and 
violent times,' as they have been well called, ' which 
we read of in our Bibles,' people struck one another, 
and people killed one another, for very little matters 
as we should think them. And the most efficient 
counteractive machinery which now preserves that 
peace, then did not exist. We have now in the 
midst of us a formed, elaborate, strong government, 
which is incessantly laying down the best rules 
which it can find to prevent trouble under changing 
circumstances, and which constantly applies a sharp 
pervading force running through society to prevent 
and punish breaches of those rules.' We are so 
familiar with the idea of a government inherently 
possessing and daily exercising both executive and 
legislative power, that we scarcely comprehend the 
possibility of a nation existing without them. But 
if we attend to the vivid picture given in the Book 
of Judges of an early stage in Hebrew society, we 
shall see that there was then absolutely no legislative 
power, and only a faint and intermittent executive 
power. The idea of law-making, the idea of making 



44 THE POSTULATES OF 

new rules for new circumstances, would have been as 
incomprehensible to Gideon or Abimelech as the 
statutes at large to a child of three years old. They 
and their contemporaries thought that there was an 
unalterable law consecrated by religion and con- 
firmed by custom which they had to obey, but they 
could not have conceived an alteration of it except 
as an act of wickedness — a worshipping of Baal. 
And the actual coercive power available for punish- 
ing breaches of it was always slight, and often 
broken. One 'judge,' or ruler, arises after another, 
sometimes in one tribe and place, and sometimes in 
another, and exercises some kind of jurisdiction, but 
his power is always limited ; there is no organisation 
for transmitting it, and often there is no such person 
— no king in Israel whatever. 

The names and the details of this book may or may 
not be historical, but its spirit is certainly true. The 
peace of society then reposed on a confused senti- 
ment, in which respect for law, as such — at least law 
in our usual modern sense — was an inconsiderable 
element, and of which the main components were a 
coercive sense of ingrained usage, which kept men 
from thinking what they had not before thought, and 
from doing what they had not before done ; a vague 
horror that something, they did not well know what, 



ENGLISH POLITICAL ECONOMY 45 

might happen if they did so ; a close religion which 
filled the air with deities who were known by in- 
herited tradition, and who hated uninherited ways ; 
and a submission to local opinion inevitable when 
family and tribe were the main props of life, — when 
there really was ' no world without Verona's walls,' — 
when every exile was an outcast, expelled from what 
was then most natural, and scarcely finding an alter- 
native existence. 

No doubt this sentiment was in all communities 
partially reinforced by police. Even at the time of 
the ' Judges,' there were no doubt ' local authorities,' 
as we should now say, who forcibly maintained some 
sort of order even when the central power was weak- 
est. But the main support of these authorities was 
the established opinion ; they had no military to call 
in, no exterior force to aid them ; if the fixed senti- 
ment of the community was not strong enough to 
aid them, they collapsed and failed. But that fixed 
sentiment would have been at once weakened, if not 
destroyed, by a free circulation of labour, which is a 
spring of progress that is favourable to new ideas, 
that brings in new inventions, that prevents the son 
being where his father was, that interrupts the tra- 
dition of generations and breaks inherited feeling. 
Besides causing new sorts of quarrels by creating 



46 THE POSTULATES OF 

new circumstances and new occasions, this change 
of men from employment to employment decomposes 
the moral authority which alone in this state of 
society can prevent quarrels or settle them. Accord- 
ingly, the most -successful early societies have for- 
bidden this ready change as much as possible, and 
have endeavoured, as far as they could, to obtain 
the advantages of the division of labour without it. 
Sir Henry Maine, to whom this subject so peculiarly 
belongs, and who has taught us so much more on it 
than any one else, shall describe the industrial ex- 
pedients of primitive society as he has seen them 
still surviving in India: — 'There is,' he says, 'yet 
another feature of the modern Indian cultivating 
group which connects them with primitive western 
communities of the same kind. I have several times 
spoken of them as organised and self-acting. They, 
in fact, include a nearly complete establishment of 
occupations and trades for enabling them to continue 
their collective life without assistance from any per- 
son or body external to them. Besides the headmen 
or council exercising quasi-judicial, quasi-legislative 
power, they contain a village police, now recognised 
and paid in certain provinces by the British Govern- 
ment. They include several families of hereditary 
traders ; the blacksmith, the harness-maker, the 



ENGLISH POLITICAL ECONOMY 47 

shoemaker. The Brahmin is also found for the per- 
formance of ceremonies, and even the dancing-girl 
for attendance at festivities. There is invariably a 
village accountant, an important person among an 
unlettered population, so important, indeed, and so 
conspicuous, that, according to reports current in 
India, the earliest English functionaries engaged in 
settlements of land were occasionally led by their 
assumption that there must be a single proprietor 
somewhere to mistake the accountant for the owner 
of the village, and to record him as such in the 
official register. But the person practising any one 
of these hereditary employments is really a servant 
of the community as well as one of its component 
members. He is sometimes paid by an allowance in 
grain, more generally by the allotment to his family 
of a piece of land in hereditary possession. What- 
ever else he may demand for the wares he produces 
is limited by a fixed price very rarely departed 
from.' 

To no world could the free circulation of labour, 
as we have it in England, and as we assume it in our 
Political Economy, be more alien, and in none would 
it have been more incomprehensible. In this case as 
in many others, what seems in later times the most 
natural organisation is really one most difficult to 



48 THE POSTULATES OF 

create, and it does not arise till after many organisa- 
tions which seem to our notions more complex have 
preceded it and perished. The village association of 
India, as Sir Henry Maine describes it, seems a much 
more elaborate structure, a much more involved piece 
of workmanship, than a common English village, 
where everyone chooses his own calling, and where 
there are no special rules for each person, and where 
a single law rules all. But in fact our organisation 
is the more artificial because it presupposes the per- 
vading intervention of an effectual Government — the 
last triumph of civilisation, and one to which early 
times had nothing comparable. In expecting what 
we call simple things from early ages, we are in fact 
expecting them to draw a circle without compasses, 
to produce the results of civilisation when they have 
not attained civilisatiou. 

One instance of this want of simplicity in early 
institutions, which has, almost more than any other, 
impaired the free transit of labour, is the com- 
plexity of the early forms of landholding. In a 
future page I hope to say something of the general 
effects of this complexity, and to compare it with the 
assumptions as to ownership in land made by Ricardo 
and others. I am here only concerned with it as 
affecting the movement of men, but in this respect 



ENGLISH POLITICAL ECONOMY 49 

its effect has been incalculable. As is now generally 
known, the earliest form of landowning was not in- 
dividual holding, but tribal owning. In the old 
contracts of Englishmen with savages nothing was 
commoner than for the king or chief to sell tracts of 
land, — and the buyers could not comprehend that 
according to native notions he had no right to do so, 
that he could not make a title to it, and that accord- 
ing to those notions there was no one who could. 
Englishmen in all land dealings looked for some 
single owner, or at any rate some small number of 
owners, who had an exceptional right over particular 
pieces of land ; they could not conceive the supposed 
ownership of a tribe, as in New Zealand, or of a 
village in India, over large tracts. Yet this joint- 
stock principle is that which has been by far the 
commonest in the world, and that which the world 
began with. And not without good reason. In the 
early ages of society, it would have been impossible 
to maintain the exclusive ownership of a few persons 
in what seems at first sight an equal gift to all — a 
thing to which everyone has the same claim. There 
was then no distinct government apart from and 
above the tribe any more than among New Zea- 
landers now. There was no compulsory agency 
which could create or preserve exclusive ownership 



50 THE POSTULATES OF 

of the land, even if it had been wished. And of 
course it could not have been wished, for though 
experience has now conclusively shown that such 
exclusive ownership is desirable for and beneficial to 
the nation as a whole, as well as to the individual 
owner, no theorist would have been bold enough to 
predict this beforehand. This monopoly is almost a 
paradox after experience, and it would have seemed 
monstrous folly before it. Indeed, the idea of a dis- 
cussion of it, is attributing to people in the year 
1000 B.C. the notions of people in the year 1800 a.d. 
Common ownership was then irremediable and in- 
evitable ; no alternative for it was possible, or would 
then have been conceivable. But it is in its essence 
opposed to the ready circulation of labour. Few 
things fix a man so much as a share in a property 
which is fixed by nature ; and common ownership, 
wherever it prevails, gives the mass of men such a 
share. 

And there is another force of the same tendency 
which does not act so widely, but which when it does 
act is even stronger — in many cases is omnipotent. 
This is the disposition of many societies to crystallise 
themselves into specialised groups, which are definite 
units, each with a character of its own, and are 
more or less strictly hereditary. Sir Henry Maine has 



ENGLISH POLITICAL ECONOMY 51 

described to us how in an Indian village the black- 
smith is hereditary, and the harness-maker, and the 
shoemaker, — and this is natural, for every trade has 
its secrets, which make a kind of craft or c mystery ' 
of it, and which must be learnt by transmission or 
not at all. The first and most efficient kind of 
apprenticeship is that by birth; the father teaches 
his son that by which he makes his living, almost 
without knowing it ; the son picks up the skill which 
is in the air of the house, almost without feeling that 
he is doing so. Even now we see that there are city 
families, and university and legal families, — families 
where a special kind of taste and knowledge are 
passed on in each generation by tradition, and which 
in each have in that respect an advantage over others. 
In most ages most kinds of skilled labour have shown 
a disposition to intensify this advantage by combina- 
tion — to form a bounded and exclusive society, guild, 
trades union, or whatever it may be called, which 
keeps or tries to keep in each case to itself the rich 
secret of the inherited art. And even when no 
pains are taken, each special occupation, after it 
gains a certain size, tends to form itself into a 
separate group. Each occupation has certain peculiar 
characteristics which help to success in it, and which, 
therefore, it fosters and develops; and in a subtle 

E 2 



52 THE POSTULATES OF 

way these traits collect together and form a group- 
character analogous to a national character. The 
process of caste-making is often thought to be an 
old-world thing which came to an end when certain 
old castes were made and fixed before the dawn of 
history. But in fact the process has been actively at 
work in recent times, and has hardly yet died out. 
Thus in Cashmere, where the division of castes is 
already minute, Mr. Drew tells us that of the Batals 
— a class at the very bottom of the scale, ' whose 
trade it is to remove and skin carcasses, and to cure 
leather,' — he has heard ' that there are two classes ; 
so apt are communities in India to divide and to sub- 
divide, to perpetuate differences, and to separate 
rather than amalgamate. The higher Batals follow 
the Mohammedan rules as to eating, and are allowed 
some fellowship with the other Mohammedans. The 
lower Batals eat carrion, and would not bear the 
name of Mohammedans in the mouths of others, 
though they might call themselves so.' Just so, Mr. 
Hunter says that ' the Brahmans of Lower Bengal 
bore to the Brahmans of Oudh the same relation that 
the landed gentry of Canada or Australia bears to 
the landed gentry of England. Each is an aristo- 
cracy, both claim the title of esquire, but each is 
composed of elements whose social history is widely 



ENGLISH POLITICAL ECONOMY 53 

different, and the home aristocracy never regards the 
successful settlers as equal in rank. The Brahmans 
of the midland land went further ; they declared the 
Brahmans of Lower Bengal inferior not only in the 
social scale, but in religious capabilities. To this 
day many of the north country Brahmans do not eat 
with the Brahmans of the lower valley, and convicted 
felons from the north-west will suffer repeated flog- 
gings in jail, for contumacy, rather than let rice 
cooked by a Bengal Brahman pass their lips.' Caste- 
making is not a rare act, but a constantly occurring 
act, when circumstances aid it, and when the human 
mind is predisposed to it. 

One great aid to this process is the mutual 
animosity of the different groups. ' What one nation 
hates,' said Napoleon, l is another nation ; ' just so, 
what one caste hates is another caste : the marked 
characteristics of each form — by their difference — a 
certain natural basis for mutual dislike. There is an 
intense disposition in the human mind — as you may 
see in any set of schoolboys — to hate what is unusual 
and strange in other people, and each caste supplies 
those adjoining it with a conspicuous supply of what 
is unusual. And this hatred again makes each caste 
more and more unlike the other, for everyone wishes 
as much as possible to distinguish himself from the 



54 THE POSTULATES OF 

neighbouring hated castes by excelling in the pecu- 
liarities of his own caste, and by avoiding theirs. 

In the ancient parts of the world these contrasts 
of group to group are more or less connected for the 
most part with contrasts of race. Very often the 
origin of the caste — the mental tendency which made 
its first members take to its special occupation — was 
some inborn peculiarity of race ; and at other times, 
as successive waves of conquest passed over the 
country, each race of conquerors connected themselves 
most with, and at last were absorbed in, the pre- 
existing kind of persons which they most resembled, 
and frequently in so doing hardened into an absolute 
caste what was before a half-joined and incipient 
group. 

Each conquest, too, tends to make a set of out- 
casts — generally from the worst part of the previous 
population — and these become ' hewers of wood and 
drawers of water ' to the conquerors — that is, they are 
an outlying and degraded race, which is not admitted 
to compete or mix with the others, and which becomes 
more degraded from feeling that it is thus inferior, 
and from being confined to the harder, baser, and 
less teaching occupations. And upon these unhappy 
groups the contempt and hatred of the higher ones 
tend to concentrate themselves, and, like most strong 



ENGLISH POLITICAL ECONOMY 55 

sentiments in the early world, these feelings find for 
themselves a religions sanction. To many villages in 
India, Sir Henry Maine says, there are attached a 
class of ' outsiders ' who never enter the village, or 
only enter reserved portions of it, who are looked on 
as ' essentially impure,' ' whose very touch is avoided 
as contaminating.' These poor people are more or 
less thought to be ' accursed ; ' to have some taint 
which shows that the gods hate them, and which 
justifies men in hating them too, and in refusing to 
mix with them. 

The result of these causes is, that many ancient 
societies are complex pieces of patchwork — bits of 
contrasted human nature, put side by side. They 
have a variegated complexity, which modern civilised 
States mostly want. And there must clearly have 
been an advantage in this organisation of labour — to 
speak of it in modern phrase — though it seems to us 
now so strange, or it would not have sprung up 
independently in many places and many ages, and 
have endured in many for long tracts of years. This 
advantage, as we have seen, was the gain of the 
division of labour without the competition which with 
us accompanies it, but which the structure of society 
was not then hard enough to bear. 

No doubt we must not push too far this notion of 



56 THE POSTULATES OF 

the rigidity of caste. The system was too rigid to 
work without some safety-valves, and in every age 
and place where that system prevails, some have been 
provided. Thus in India we are told ' a Brahmana 
unable to subsist by his duties may live by the duty 
of a soldier ; if he cannot get a subsistence by either 
of these employments, he may apply to tillage and 
attendance on cattle, or gain a competence by traffic, 
avoiding certain commodities. A Ghatriya in distress 
may subsist by all these means, but he must not have 
recourse to the highest functions. A Vaisya unable 
to subsist by his own duties may descend to the servile 
acts of a Sudra; and a Sudra, not finding employ- 
ment by waiting on men of the higher classes, may 
subsist by handicrafts ; besides the particular occu- 
pations assigned to the mixed classes, they have the 
alternative of following that profession which regularly 
belongs to the class from which they derive their 
origin on the mother's side ; ' and so on, without end. 
And probably it is through these supplementary 
provisions, as I may call them, that the system of 
caste ultimately breaks down and disappears. It 
certainly disappeared in ancient Egypt when the 
compact Roman Government was strong enough to 
do without it, and when a change of religion had 
removed the sanctions which fixed and consecrated 



ENGLISH POLITICAL ECONOMY 57 

it. The process is most slow, as our experience in 
India proves. The saying that ' La Providence a ses 
aises dans le temps ' has rarely elsewhere seemed so 
true. Still, the course is sure, and the caste system 
will in the end pass away, whenever an efficient 
substitute has been made for it, and the peace of 
industry secured without it. 

But it would be a great mistake to believe that, 
whenever and wherever there is an efficient external 
government capable of enforcing the law, and of 
makiug the competitive migration of labour safe 
and possible, such migration of itself at once begins. 
There is, in most cases, a long and dreary economic 
interval to be passed first. In many countries, the 
beginning of such migration is for ages retarded by 
the want of another requisite — the want of external 
security. We have come in modern Europe to look 
on nations as if they were things indestructible— at 
least, on large nations. But this is a new idea, and 
even now it has to be taken with many qualifications. 
But in many periods of history it has not been true 
at all ; the world was in such confusion, that it was 
almost an even chance whether nations should con- 
tinue, or whether they should be conquered and 
destroyed. In such times the whole energy of the 
community must be concentrated on its own defence ; 



58 THE POSTULATES OF 

all that interferes with it must be sacrificed, if it is to 
live. And the most efficient mode of defending it 
is generally a feudal system ; that is, a local militia 
based on the land, where each occupier of the soil 
has certain services to render, of which he cannot 
divest himself, and which he must stay on certain 
fields to perform when wanted. In consequence the 
races of men which were possessed of an organisation 
easily adapting itself to the creation of such a militia, 
have had a striking tendency to prevail in the strug- 
gle of history. ' The feudal system,' says Sir George 
Campbell, on many accounts one of our most compe- 
tent judges, ' I believe to be no invention of the 
Middle Ages, but the almost necessary result of the 
hereditary character of the Indo-Germanic institu- 
tions, when the tribes take the position of dominant 
conquerors. They form, in fact, an hereditary army, 
with that gradation of fealty from the commander to 
the private soldier which is essential in military opera- 
tions. Accordingly, we find that among all the tribes 
of Indo-Germanic blood which have conquered and 
ruled Indian provinces, the tendency is to establish a 
feudal system extremely similar to that which prevailed 
in Europe. In Rajpootana the system is still in full 
force. The Mahrattas and Sikhs had both established 
a similar system. In my early days it existed in 



ENGLISH POLITICAL ECONOMY 59 

great perfection in some parts of the Cis-Sutlej 
States.' And where the system is most developed, 
at the lowest point of the scale there is always an 
immovable class — serfs, villeins regardants, or what 
we choose to call them— who do not fight themselves, 
who perhaps are too abject in spirit, or perhaps are 
of too dubious fidelity to be let have arms, but who 
cultivate the ground for those who really fight. The 
soldier class, rooted to the land by martial tenure } 
has beneath it a non-soldier class even more rooted 
to the soil by the tenure of tilling it. I need not 
say how completely such a system of military defence, 
and such a system of cultivation, are opposed to the 
free transit of labour from employment to employ- 
ment. Where these systems are perfectly developed, 
this transit is not so much impeded as prevented. 

And there is a yet more pervading enemy of 
the free circulation of labour. This is slavery. We 
must remember that our modern notion that slavery 
is an exceptional institution, is itself an exceptional 
idea ; it is the product of recent times and recent 
philosophies. No ancient philosopher, no primitive 
community, would have comprehended what we 
meant by it. That human beings are divided into 
strong and weak, higher and lower, or what is 
fchought to be such ; and that the weak and inferior 



60 THE POSTULATES OF 

ought to be made ±o serve the higher and better, 
whether they would wish to do so or not, are settled 
axioms of early thought. Whatever might be the 
origin and whatever might be the fate of other in- 
stitutions, the ancient world did not doubt that 
slavery at all events existed ' by the law of nature,' 
and would last as long as men. And it interferes 
with the ready passage of labour from employment 
to employment in two ways. First, it prevents what 
we call for this purpose ' employments '—that is, 
markets where labour may be bought, mostly in 
order that the produce may be sold. Slavery, on the 
contrary, strengthens and extends domestic manufac- 
tures where the produce is never sold at all, where it 
is never intended to be so, but where each household 
by its own hands makes what it wants. In a slave- 
community so framed, not only is there little quick 
migration of free labour, but there are few fit places 
for it to migrate between ; there are no centres for 
the purchase of much of it ; society tends to be 
divided into self-sufficing groups, buying little from 
the exterior. And at a later stage of industrial 
progress slavery arrests the movement of free labour 
still more effectively by providing a substitute. It 
is, then, the slave labour which changes occupation, 
and not the free labour. Just as in the present day 



ENGLISH POLITICAL ECONOMY 61 

a capitalist who wants to execute any sort of work 
hires voluntary labour to do it, so in a former stage 
of progress he would buy slaves in order to do it. 
He might not, indeed, be able to buy enough slaves 
— enough suitable slaves, that is, for his purpose. 
The organisation of slavery has never been as effectual 
as our present classified system of free labour, and 
from intrinsic defects never can be. But it does 
develop earlier. Just when the system of free labour 
might develop if it were let alone, the imperfect 
substitute of slavery steps in and spoils it. When 
free labour still moves slowly and irregularly, and 
when frequent wars supply the slave-market with 
many prisoners, the slave-market is much the easiest 
resource of the capitalist. So it is when a good 
slave-trade keeps it well filled. The capitalist finds 
it better to buy than to hire, for there are in this 
condition of things comparatively many men to be 
bought and comparatively few to be hired. And the 
result takes unexpected directions. ' What the 
printing press is in modern times,' says a German 
writer, ' that slavery was in ancient times.' And 
though this may be a little exaggerated, it is certain 
that in ancient Rome books were produced much 
cheaper and in much greater number than they were 
for hundreds of years afterwards. When there was 



Q>2 THE POSTULATES OF 

a demand for a book, extra copying-slaves could be 
' turned on ' to multiply it in a way which in later 
times, when slavery had ceased, was impossible, and 
which is only surpassed by the way in which addi- 
tional compositors are applied to works in demand 
now. And political philosophers proposed to obtain 
revenue from this source, and to save taxation. 
' Suppose,' says Xenophon, ' that the Athenian State 
should buy twelve thousand slaves, and should let 
them out to work in the mines at an obolus a head, 
and suppose that the whole amount annually thus 
received should be employed in the purchase of new 
slaves, who should again in the same way yield the 
same income, and so on successively ; the State 
would then by these means in five or six years possess 
six thousand slaves/ which would yield a large 
income. The idea of a compound interest investment 
in men, though abhorrent to us, seemed most natural 
to Xenophon. And almost every page of the classics 
proves how completely the civilisation then existing 
was based on slavery in one or other of its forms — 
that of skilled labour (the father of Demosthenes 
owned thirty-three cutlers and twenty coachmakers) 
or unskilled, that might either be worked by the 
proprietor or let out, as he liked. Even if this 
system had only economic consequences, it must 



ENGLISH POLITICAL ECONOMY 63 

have prevented the beginning of freely moving labour, 
for it is much handier than such a system can be at 
its outset. And as we know, the system has moral 
effects working in the same way even more powerful, 
for it degrades labour by making it the slave-mark, 
and makes the free labourer — whether the proletaire 
of ancient cities, or the ' mean white ' of American 
plantations— one of the least respectable and the 
least workmanlike of mankind. 

Happily this full-grown form of slavery is exceed- 
ingly frail. We have ourselves seen in America how 
completely it collapses at an extrinsic attack ; how 
easy it is to destroy it, how impossible to revive it. 
And much of the weakness of ancient civilisation was 
also so caused. Any system which makes the mass 
of a society hate the constitution of that society, 
must be in unstable equilibrium. A small touch will 
overthrow it, and scarcely any human power will 
re-establish it. And this is the necessary effect of 
capitalistic slavery, for it prevents all other labourers, 
makes slaves the ' many ' of the community, and fills 
their mind with grief and hatred. Capitalistic slavery 
is, as history shows, one of the easiest things to efface, 
as domestic slavery is one of the hardest. But 
capitalistic slavery has vitally influenced most of the 
greatest civilisations; and as domestic slavery has 



64 THE POSTULATES OF 

influenced nearly all of them, the entire effect of the 
two has been prodigious. 

We see then that there are at least four conditions 
to be satisfied before this axiom of our English 
Political Economy is true within a nation. Before 
labour can move easily and as it pleases from employ- 
ment to employment there must be such employments 
for it to move between ; — there must be an effectual 
Government capable of maintaining peace and order 
during the transition, and not requiring itself to be 
supported by fixity of station in society as so many 
governments have been ; — the nation must be capable 
of maintaining its independent existence against 
other nations without a military system dependent 
on localised and immovable persons ; atid there must 
be no competing system of involuntary labour limiting 
the number of employments or moving between them 
more perfectly than contemporary free labour. These 
are not indeed all the conditions needful for the truth 
of the axiom, but the others can be explained better 
when some other matters have been first discussed. 



ENGLISH POLITICAL ECONOMY 65 



n. 

THE TRANSFERABILITY OF CAPITAL. 

In my last paper I discussed the fundamental 
principle of English Political Economy, that within 
the limits of a nation labour migrates from employ- 
ment to employment, as increased remuneration 
attracts or decreased remuneration repels it ; and now 
I have to treat the corresponding principle as to 
capital, that it flows or tends to flow to trades of which 
the profits are high, that it leaves or tends to leave 
those in which the profits are low, and that in conse- 
quence there is a tendency — a tendency limited and 
contracted, but still a tendency— to an equality of 
profits through commerce. 

First, this requires such a development of the 
division of labour as to create what we call ' trade,' 
that is to say, a set of persons working for the wants 
of others, and providing for their own wants by the 
return-commodities received from those others. But 
this development has only been gradually acquired 

F 



66 THE POSTULATES OF 

by the human race. Captain Cook found some Aus- 
tralian tribes to whom the idea of traffic seemed 
unknown. They received what was given them 
readily, but they received it as a present only ; 
they seemed to have no notion of giving anything in 
lieu of it. The idea of barter — an idea usually so 
familiar to the lower races of men — appeared never 
to have dawned on these very low ones. But among 
races in such a condition there is no change of trades 
as capital becomes more and more profitable in any 
one. The very conception comes long after. Every- 
one works for himself at everything ; and he always 
works most at what he likes most for the time ; as 
he changes his desires, so far as he can he changes 
his labour. Whenever he works he uses the few 
tools he has, the stone implements, the charred 
wood, the thongs of hide, and other such things, in 
the best way he can ; a hundred savages are doing 
so at once, some in one way, some in another, and 
these are no doubt c shiftings of capital.' But there 
is no computation of profit, as we now reckon profit, 
on such shiftings. Profit, as we calculate, means 
that which is over after the capital is replaced. But 
a savage incapable of traffic does not make this cal- 
culation as to his flints and his hides. The idea 
could not even be explained to him. 



ENGLISH POLITICAL ECONOMY 67 

Secondly, this comparison requires a medium in 
which the profits can be calculated, that is, a money. 
Supposing that in the flax trade profits are 5 per 
cent., and that side by side in the cotton trade they 
are 15 per cent., capital will now-a-days immediately 
run from one to the other. And it does so because 
those who are making much, try to get more capital, 
and those who are making little — still more those 
who are losing — do not care to keep as much as they 
have. But if there is no money to compute in, 
neither will know what they are making, and there- 
fore the process of migration wants its motive, and 
will not begin. The first sign of extra profit in a 
trade — not a conclusive, but a strongly presumptive 
one — is an extra high price in the article that trade 
makes or sells; but this test fails altogether when 
there is no ' money ' to sell in. And the debit side 
of the account, the cost of production, is as difficult 
to calculate when there is no common measure 
between its items, or between the product, and any 
of them. Political Economists have indeed an idea 
of ' exchangeable value ' — that is, of the number of 
things which each article will exchange for — and 
they sometimes suppose a state of barter in which 
people had this notion, and in which they calculated 
the profit of a trade by deducting the exchangeable 

F 2 



68 THE POSTULATES OP 

value of the labour and commodities used in its pro- 
duction from the value of the finished work. But 
such a state of society never existed in reality. No 
nation which was not clever enough to invent a 
money, was ever able to conceive so thin and hard 
an idea as ' exchangeable value.' Even now Mr. 
Fawcett justly says that it puzzles many people, and 
sends them away frightened from books on Political 
Economy. In fact it is an ideal which those used to 
money prices have framed to themselves. They see 
that the price of anything, the money it fetches, is 
equal to its ' purchasing power ' over things, and by 
steadily attending they come to be able to think of 
this ' purchasing power ' separately, and to call and 
reason upon it as exchangeable value. But the idea 
is very treacherous even to skilled minds, and even 
now-a-days not the tenth part of any population could 
ever take it in. As for the nations really in a state 
of barter ever comprehending it, no one can imagine 
it, for they are mostly unequal to easy arithmetic, 
and some cannot count five. A most acute traveller 
thus describes the actual process of bargaining among 
savage nations as he saw it. 'In practice,' Mr. 
G-alton tells us of the Damaras, ' whatever they may 
possess in their language, they certainly use no 
numeral greater than three. When they wish to 



ENGLISH POLITICAL ECONOMY 69 

express four they take to their fingers, which are 
to them as formidable instruments of calculation as a 
sliding rule is to an English schoolboy. They puzzle 
very much after five, because no spare hand remains 
to grasp and secure the fingers that are required for 
" units." Yet they seldom lose oxen : the way in 
which they discover the loss of one is not by the 
number of the herd being diminished, but by the 
absence of a face which they know. When bartering 
is going on each sheep must be paid for separately. 
Thus suppose two sticks of tobacco to be the rate of 
exchange for one sheep, it would sorely puzzle a 
Damara to take two sheep and give him four sticks. 
I have done so, and seen a man first put two of the 
sticks apart, and take a sight over them at one of 
the sheep he was about to sell. Having satisfied 
himself that that one was honestly paid for, and 
finding to his surprise that exactly two sticks re- 
mained in hand to settle the account for the other 
sheep, he would be afflicted with doubts ; the trans- 
action seemed too pat to be correct, and he would 
refer back to the first couple of sticks, and then his 
mind got hazy and confused, and wandered from one 
sheep to the other, and he broke off the transaction 
until two sticks were put into his hand and one 
sheep driven away, and then the other two sticks 



70 THE POSTULATES OF 

given him, and the second sheep driven away.' Such 
a delineation of primitive business speaks for itself, 
and it is waste of space showing further that an 
abstraction like ' value in exchange ' is utterly beyond 
the reach of the real bartering peoples— that a habit 
of using money, and of computing in it, are necessary 
preliminaries to comparisons of profits. 

Unquestionably the most primitive community 
can see if a pursuit utterly fails, or if it immensely 
succeeds. The earliest men must have been eager in 
making flint tools, for there are so many of them, and 
no doubt they did not try to breed cattle where they 
died. But there was in those days no adjusted com- 
parison between one thing and another ; all pursuits 
which anyhow suited went on then as they do among 
savages now. 

Money, too, is in this matter essential, or all but 
essential, in another way. It is a form in which 
capital is held in suspense without loss. The transfer 
of capital from employment to employment is a matter 
requiring consideration, consideration takes time, and 
the capital must be somewhere during that time. 
But most articles ■ are bought at a risk ; they lose in 
the process, and become second-hand ; an ordinary 
person cannot get rid of them without receiving for 
them less — often much less— than he crave. But 



ENGLISH POLITICAL ECONOMY 71 

money is never ' second-hand ; ' it will always fetch 
itself, and it loses nothing by keeping*. No doubt 
modern civilisation has invented some other forms of 
property which are almost as good to hold as money. 
Some interest-bearing securities, like Exchequer bills, 
are so, and pay an interest besides. But these are 
the creatures of money, so to say, and based upon it ; 
they presuppose it, and would not be possible without 
it. A community of pure barter, even if it could 
reckon and compare profits, would not be able to move 
capital accurately from one trade to another, for it 
possesses no commodity which, could, without risk of 
loss that could not be calculated, be held idle during 
the computation. 

The refined means by which the movement is now 
effected is one of the nicest marvels of our commercial 
civilisation. The three principal of them are as 
follows : — 

First, — There is the whole of the loan fund of 
the country lying in the hands of bankers and bill- 
brokers, which moves in an instant towards a trade 
that is unusually profitable, if only that trade can pro- 
duce securities which come within banking rules. 
Supposing the corn trade to become particularly good, 
there are immediately twice the usual number of corn 
bills in the bill-brokers' cases ; and if the iron trade, 



72 THE POSTULATES OF 

then of iron bills. You could almost see the change 
of capital, if you could look into the bill cases at dif- 
ferent times. But what you could not see is the 
mental skill and knowledge which have made that 
transfer, and without which it could not have been 
made safely. Probably it would be new to many 
people if stated plainly ; but a very great many of the 
strongest heads in England spend their minds on little 
else than on thinking whether other people will pay 
their debts. The life of Lombard Street bill-brokers 
is almost exclusively so spent. Mr. Chapman, one of 
the partners in Overend, Gurney, and Co., once rather 
amused a parliamentary committee by speaking with 
unction and enthusiasm of ' paper of the very finest 
quality,' by which he meant paper on which the best 
promises were written. Bills of exchange are only 
undertakings to pay money, and the most likely to be 
paid are, in the market phrase, of the ' finest quality,' 
and the less likely of inferior quality. The mind of 
a man like Mr. Chapman, if it could be looked into, 
would be found to be a graduating machine marking 
in an instant the rises and falls of pecuniary likeli- 
hood. Each banker in his own neighbourhood is the 
same ; he is a kind of ' solvency-meter,' and lives by 
estimating rightly the ' responsibility of parties,' as 
he would call it. And the only reason why the 



ENGLISH POLITICAL ECONOMY 73 

London bill-broker lias to do it on a greater scale is 
tliat, being in the great centre, he receives the surplus 
savings not of one district but of many, which find 
no means of employment there. He is thus become 
the greatest and most just measurer of moneyed 
means and moneyed probity which the world has ever 
seen ; — to reduce it to its lowest terms, he knows that 
more people will pay more debts than anyone who 
now is, or ever before was, in the world. And the 
combined aggregate of these persons is a prepared 
machine ready to carry capital in any direction. The 
moment auy set of traders want capital, the best of 
them, those whose promises are well known to be 
good, get it in a minute, because it is lying ready in 
the hands of those who know, and who live by know- 
ing, that they are fit to have it. 

Secondly, — In modern England, there is a great 
speculative fund which is always ready to go into 
anything which promises high profits. The largest 
part of this is composed of the savings of men of 
business. When, as in 1871, the profits of many 
trades suddenly become much greater than usual, the 
Stock Exchange instantly becomes animated ; there is 
at once a market for all kinds of securities, so long as 
they promise much, either by great interest or by rise 
of prices, Men of business who are used to a high 



74 THE POSTULATES OF 

percentage of profit in their own trade despise 8 or 4 
per cent., and think that they ought to have much 
more. In consequence there is no money so often 
lost as theirs ; there is an idea that it is the country 
clergyman and the ignorant widow who mostly lose 
by bad loans and bad companies. And no doubt they 
often do lose. But I believe that it is oftener still 
men of business, of slight education and of active 
temperament, who have made money rapidly, and 
who fancy that the skill and knowledge of a special 
trade which have enabled them to do so, will also 
enable them to judge of risks, and measure con- 
tingencies out of that trade ; whereas, in fact, there 
are no persons more incompetent, for they think they 
know everything, when they really know almost 
nothing out of their little business, and by habit and 
nature they are eager to be doing. So much of their 
money as comes to London is in greater jeopardy 
almost than any other money. But there is a great 
deal which never comes there, and which those who 
make it are able to put out in pushing their own trade 
and in extending allied trades. The very defects 
which make the trader so bad a judge of other things 
make him an excellent judge of these, and he is ready 
and daring, and most quick to make use of what he 
knows. Each trade in modern commerce is surrounded 



ENGLISH POLITICAL ECONOMY 75 

by subsidiary and kindred trades, which familiarise 
the imagination with it, and make its state known ; 
as soon, therefore, as the conspicuous dealers in that 
trade are known to be doing particularly well, the 
people in the surrounding trades say, ' Why should 
not we do as well too ? ' and they embark their capital 
in it — sometimes, of course, wrongly, but upon the 
whole wisely and beneficially. In an animated busi- 
ness world like ours, these inroads into the trades 
with largest gains by the nearest parts of the specu- 
lative fund are incessant, and are a main means of 
equalising profits. 

Lastly, — There is the obvious tendency of young 
men starting in business to go into the best-paying 
business, or what is thought to be so at that time. 
This, in the best cases, also acts mainly on the allied 
and analogous trades. Little good, for the most 
part, comes of persons who have been brought up on 
one side of the business world going quite to the 
other side — of farmers' sons going to cotton-spinning, 
or of lacemakers' sons going into shipping. Each 
sort of trade has a tradition of its own, which is 
never written, probably could not be written, which 
can only be learned in fragments, and which is best 
taken in early life, before the mind is shaped and the 
ideas fixed. From all surrounding- trades there is an 



76 THE POSTULATES OF 

incessant movement of young men with new money 
into very profitable trades, which steadily tends to 
reduce that profitableness to the common average. 

I am more careful than might seem necessary to 
describe the entire process of equalisation at length, 
because it is only by so doing that we can see how 
complex it is, and how much development in society 
it requires ; but as yet the description is net com- 
plete, or nearly so. We have only got as far as the 
influx of money into new trades, but this is but a 
small part of what is necessary. Trades do not live 
by money alone ; money by itself will not make any- 
thing. What, then, do we mean when we speak of 
' capital ' as flowing from employ ment to employ- 
ment? 

Some writers speak as if the only thing which 
transfers of capital effect is a change in the sort of 
labour that is set in motion ; and no doubt this is 
so far true, that all new employments of capital do 
require new labour. Human labour is the primitive 
moving force, and you must have more of it if you 
want more things done ; but the description, though 
true, is most incomplete, as the most obvious facts 
in the matter prove. When new capital comes into 
cotton-spinning, this meaus not only that new money 
is applied to paying cotton operatives, but also that 



ENGLISH POLITICAL ECONOMY 77 

new money is applied to buying new spinning 
machines; these spinning machines are made by 
other machines, as well as labour ; and the second lot 
of machines again by a third set, as well as other 
labour. In the present state of the world, nothing 
is made by brute labour; everything is made by aids 
to labour; and when capital goes from trade to 
trade, it settles not only which sort of labour shall 
be employed, but which sort of existing machines 
should be first used up, which sort of new ones 
made, and how soon those new ones shall be worn 
out, not only in the selected trade, but in an endless 
series subsidiary to it. 

To understand the matter fully, we must have a 
distinct view of what on this occasion and on this 
matter we mean by ' capital.' The necessity of a 
science like Political Economy is that it must borrow 
its words from common life, and therefore from a 
source where they are not used accurately, and can- 
not be used accurately. When we come to reason 
strictly on the subjects to which they relate, we must 
always look somewhat precisely to their meaning; 
and the worst is that it will not do, if you are writ- 
ing for the mass of men, even of educated men, to 
use words always in the same sense. Common words 
are so few, that if you tie them down to one meaning 



78 THE POSTULATES OF 

they are not enough for your purpose ; they do their 
work in common life because they are in a state 
of incessant slight variation, meaning one thing in 
one discussion and another a little different in the 
next. If we were really to write an invariable 
nomenclature in a science where we have so much 
to say of so many things as we have in Political 
Economy, we must invent new terms, like the 
writers on other sciences. Mr. De Morgan said (in 
defence of some fresh-coined substantive), ' Mathe- 
matics must not want words because Cicero did not 
know the differential calculus.' But a writer on 
Political Economy is bound — not perhaps by Cicero 
— but by his readers. He must not use words out 
of his own head, which they never heard of; they 
will not read him if he does. The best way, as we 
cannot do this, is to give up uniform uses — to write 
more as we do in common life, where the context is a 
sort of unexpressed ' interpretation clause,' showing 
in what sense words are used ; only, as in Political 
Economy we have more difficult things to speak of 
than in common conversation, we must take more 
care, give more warning of any change, and at 
times write out the ' interpretation clause ' for that 
page or discussion, lest there should be any mistake. 
I know that this is difficult and delicate work ; 



ENGLISH POLITICAL ECONOMY 79 

and all I have to say in defence of it is that in 
practice it is safer than the competing plan of 
inflexible definitions. Anyone who tries to express 
varied meanings on complex things with a scanty 
vocabulary of fastened senses, will find that his style 
grows cumbrous without being accurate, that he has 
to use long periphrases for common thoughts, and 
that after all he does not come out right, for he is 
half his time falling back into the senses which fit 
the case in hand best, and these are sometimes one, 
sometimes another, and almost always different from 
his ' hard and fast ' sense. In such discussions we 
should learn to vary our definitions as we want, just 
as we say, ' let x, y, z mean ' now this, and now that, 
in different problems ; and this, though they do not 
always avow it, is really the practice of the clearest 
and most effective writers. 

By capital, then, in this discussion, we mean an 
aggregate of two unlike sorts of artificial commodities 
— co-operative things which help labour, and re- 
munerative things which pay for it. The two have 
this in common, that they are the produce of human 
labour, but they differ in almost everything else if 
you judge of them by the visual appearance. Between 
a loaf of bread and a steam-engine, between a gimlet 
and a piece of bacon, there looks as if there were really 



80 THE POSTULATES OF 

nothing in common, except that man manufactured 
both. But, though the contrast of externalities is so 
great, the two have a most essential common pro- 
perty which is that which Political Economy fixes 
upon ; the possible effect of both is to augment 
human wealth. Labourers work because they want 
bread ; their work goes farther if they have good tools ; 
and therefore economists have a common word for 
both tools and bread. They are both capital, and 
other similar things are so too. 

And here we come across another of the inevit- 
able verbal difficulties of Political Economy. Taking 
its words from common life, it finds that at times 
and for particular discussions it must twist them in 
a way which common people would never think of. 
The obvious resemblances which we deal with in life 
dictate one mode of grouping objects in the mind, 
and one mode of speaking of them ; the latent but 
more powerful resemblance which science finds would 
dictate another form of speech and mental grouping. 
And then what seems a perverse use of language 
must be made. Thus, for the present discussion, the 
acquired skill of a labourer is capital, though no one 
in common life would call it so. It is a productive 
thing made by man, as much as any tool ; it is, in 
fact, an immaterial tool which the labourer uses just 



ENGLISH POLITICAL ECONOMY 81 

as he does a material one. It is co-operative capital 
as much as anything can be. And then, again, 
the most unlikely-looking and luxurious articles are 
capital if they reward and stimulate labour. Artisans 
like the best of rabbits, the best bits of meat, green 
peas, and gin ; they work to get these ; they would 
stay idle if they were not incited by these, and 
therefore these are ' capital.' Political Economy 
(like most moral sciences) requires not only to 
change its definitions as it moves from problem 
to problem, but also for some problems to use 
definitions which, unless we see the motive, seem 
most strange ; just as in Acts of Parliament the 
necessity of the draftsman makes a very technical 
use of words necessary if he is to do his work neatly, 
and the reader will easily be most mistaken and 
confused if he does not heed the dictionary which 
such Acts contain. 

Remembering all this, we see at once that it is 
principally remunerative capital which is transferable 
from employment to employment. Some tools and 
instruments are, no doubt, used in many trades, 
especially the complex ones ; knives, hammers, 
twine, and nails can be used, are used, in a thou- 
sand. The existing stock of these is transferred 
bodily when capital migrates from an employment. 



82 THE POSTULATES OF 

But, in general, as I have said before, the effect of 
the migration on co-operative capital is to change 
the speed with which the existing machines are 
worked out, and the nature of the new machines 
which are made ; the ' live skill ' of an artisan being 
treated as a machine. On remunerative capital the 
effect is simpler. As a rule, much the same com- 
modities reward labour in different trades, and if one 
trade declines and another rises, the only effect is to 
change the labourer who gets these commodities ; or, 
if the change be from a trade which employs little 
skilled labour to one which employs much, then the 
costly commodities which skilled labour wants will 
be in demand, more of them will be made, and there 
will be an increase of animation in all the ancillary 
trades which help their making. 

We see also more distinctly than before what we 
mean by an ' employment.' We mean a group of 
persons with fitting tools and of fitting skill paid by 
the things they like. I purposely speak of ' tools ' 
to include all machines, even the greatest, for I want 
to fix attention on the fact that every thing depends 
on the effort of man, — on the primary fruit of human 
labour. Without this to start with, all else is use- 
less. And I use it out of brevity to include such 
things as coal and materials, which for any other 



ENGLISH POLITICAL ECONOMY 83 

purpose no one would call so, but which are plainly 
the same for what we have now to do with. 

And ' employment ' in any large trade implies an 
' employer.' The capitalist is the motive power in 
modern production, in the ' great commerce.' He 
settles what goods shall be made, and what not; 
what brought to market, and what not. He is the 
general of the army ; he fixes on the plan of opera- 
tions, organises its means, and superintends its 
execution. If he does this well, the business 
succeeds and continues ; if he does it ill, the busi- 
ness fails and ceases. Everything depends on the 
correctness of the unseen decisions, on the secret 
sagacity of the determining mind. And I am 
careful to dwell on this, though it is so obvious, and 
though no man of business would think it worth 
mentioning, because books forget it, — because the 
writers of books are not familiar with it. They 
are taken with the conspicuousness of the working 
classes ; they hear them say, it is we who made 
Birmingham, we who made Manchester, but you 
might as well say that it was the c compositors ' who 
made the ' Times ' newspaper. No doubt the crafts- 
men were necessary to both, but of themselves they 
were insufficient to either. The printers do not 
settle what is to be printed ; the writers even do not 

G 2 



84 THE POSTULATES OF 

settle what is to be written. It is the editor who 
settles everything. He creates the 'Times' from 
day to day ; on his power of hitting the public fancy 
its prosperity and power rest; everything depends 
on his daily bringing to the public exactly what the 
public wants to buy; the rest of Printing-House 
Square — all the steam-presses, all the type, all the 
staff, clever as so many of them are, — are but imple- 
ments which he moves. In the very same way the 
capitalist edits the ' business ; ' it is he who settles 
what commodities to offer to the public ; how and 
when to offer them, and all the rest of what is 
material. This monarchical structure of money 
business increases as society goes on, just as the 
corresponding structure of war business does, and 
from the same causes. In primitive times a battle 
depends as much on the prowess of the best fighting 
men, of some Hector or some Achilles, as on the 
good science of the general. But now-a-days it is a 
man at the far end of a telegraph wire — a Count 
Moltke, with his head over some papers, — who sees 
that the proper persons are slain, and who secures 
the victory. So in commerce. The primitive 
weavers are separate men with looms apiece, the 
primitive weapon-makers separate men with flints 
apiece ; there is no organised action, no planning, 



ENGLISH POLITICAL ECONOMY 85 

contriving, or foreseeing in either trade, except on 
the smallest scale ; but now the whole is an affair of 
money and management ; of a thinking man in a 
dark office, computing the prices of guns or worsteds. 
No doubt in some simple trades these essential cal- 
culations can be verified by several persons — by a 
board of directors, or something like it. But these 
trades, as the sagacity of Adam Smith predicted, 
and as painful experience now shows, are very few ; 
the moment there comes anything difficult or com- 
plicated, the Board ' does not see its way,' and then, 
except it is protected by a monopoly, or something 
akin to monopoly, the individual capitalist beats it 
out of the field. But the details of this are not to 
my present purpose. The sole point now material is 
that the transference of capital from employment to 
employment involves the pre-existence of employ- 
ment, and this pre-existence involves that of ' em- 
ployers : ' of a set of persons — one or many, though 
usually one — who can effect the transfer of that 
capital from employment to employment, and can 
manage it when it arrives at the employment to 
which it is taken. 

And this management implies knowledge. In 
all cases successful production implies the power of 
adapting means to ends, of making what you want 



86 THE POSTULATES OE 

as you want it. But after the division of labour has 
arisen, it implies much more than this: it then re- 
quires, too, that the producer should know the wants 
of the consumer, a man whom mostly he has never 
seen, whose name probably he does not know, very 
likely even speaking another language, living accord- 
ing to other habits, and having scarcely any point of 
intimate relation to the producer, except a liking for 
what he produces. And if a person who does not 
see is to suit another who is not seen, he must have 
much head-knowledge, — an acquired learning in 
strange wants as well as of the mode of making 
things to meet them. A person possessing that 
knowledge is necessary to the process of transferring 
capital, for he alone can use it when the time comes, 
and if he is at the critical instant not to be found, 
the change fails, and the transfer is a loss and not a 
gain. 

This description of the process Dy which capital 
is transferred and of what we mean by it, may seem 
long, but it will enable us to be much shorter in 
showing the conditions which that transfer implies. 
First, it presupposes the existence of transferable 
labour, and I showed before how rare transferable 
labour is in the world, and how very peculiar are its 
prerequisites. You cannot have it unless you have a 



ENGLISH POLITICAL ECONOMY 87 

strong government, which will keep peace in the 
delicate line on which people are moving. You must 
not have fixed castes in inherited occupations, which 
at first are ways and means to do without a strong 
government, but which often last on after it begins • 
you must not have a local army which roots men to 
fixed spots for military purposes, and therefore very 
much to fixed pursuits; and you must not have 
slavery, for this is an imperfect substitute for free 
transferable labour, which effectually prevents the 
existence of it. Complete freedom of capital pre- 
supposes complete freedom of labour, and can only 
be attained when and where this exists. 

No doubt capital begins to move much before 
the movement of labour is perfect. The first great 
start of it commences with a very unpopular person, 
who is almost always spoken evil of when his name 
is mentioned, but in whom those who know the 
great things of which he has been the forerunner will 
always take a great interest. It is the money-lender- 
in a primitive community, whose capital is first 
transferred readily from occupation to occupation. 
Suppose a new crop, say cotton, becomes suddenly 
lucrative, immediately the little proprietors throng to. 
the money-lenders to obtain funds to buy cotton. 
A new trade is begun by his help, which could not 



88 THE POSTULATES OF 

have been begun without him. If cotton ceases to 
be a good crop, he ceases to lend to grow it, his 
spare capital either remains idle or goes to some 
other loan, — perhaps to help some other crop which 
has taken the place of cotton in profitableness. 
There is no more useful trade in early civilisatiou, 
thought there is none which has such a bad name, 
and not unnaturally, for there is none which then 
produces more evil as well as good. Securities for 
loans, such as we have them in developed commerce, 
are rarely to be met with in early times : the land— 
the best security as we think it— is then mostly held 
upon conditions which prevent its being made in 
that way available ; there is little movable property 
of much value, and peasants who work the land have 
scarcely any of that little ; the only thing they can 
really pledge is their labour — themselves. But then 
when the loan is not paid, ' realising the security ' is 
only possible by making the debtor a slave, and as 
this is very painful, the creditor who makes much 
use of it is hated. Even when the land can be 
pledged, peasant proprietors never think that it 
ought really to be taken if the debt for which it is 
pledged is not paid. They think that the land is 
still theirs, no matter how much has been lent them 
upon it, or how much they have neglected to pay. 



ENGLISH POLITICAL ECONOMY 89 

But odious as the ' usurer ' thus becomes, he is most 
useful really, and the beginner of the movement 
which creates the ' great commerce.' 

Another condition which precedes the free trans- 
fer of labour — the first prerequisite of the free transfer 
of capital — is slavery, and within its limits this is 
free enough ; indeed, more free than anything else 
similar, for you have not to consult the labourer 
at all, as in all other organisations you must. The 
capitalist buys the slave and sets him to do, not what 
the slave likes, but what he himself likes. I can 
imagine that a theorist would say beforehand that this 
was the best way of getting things done, though not 
for the happiness of the doer. It makes the ' working 
group ' into an army where the general is absolute, 
and desertion penal. But so subtle is the nature 
of things, that actual trial shows this structure of 
society not to be industrially superior to all others, 
but to be very ineffectual indeed, and industrially 
inferior to most of them. The slave will not work 
except he is made, and therefore he does little ; he 
is none the better, or little the better, if he does his 
work well than if he does it ill, and therefore he 
rarely cares to do it very well. On a small scale, 
and under careful supervision, a few slaves carefully 
trained may be made to do very good work, but on 



90 THE POSTULATES OF 

any large scale it is impossible. A gang of slaves 
can do nothing but what is most simple and easy, 
and most capable of being looked after. The South- 
ern States of America, for some years before their 
rebellion, were engaged in trying on the greatest 
scale and the most ample means the world has ever 
seen the experiment how far slavery would go ; and 
the result is easily stated ; they never could ' make 
brute force go beyond brute work.' 

Next, in order that capital can be transferred, it 
must exist and be at the disposal of persons who 
wish to transfer it. This is especially evident as to 
remunerative capital, which we have seen to be the 
most transferable of all capital. But the earliest 
wages-paying commodities — the food and the neces- 
saries which in simple communities the labourer 
desires — are accumulated by persons who want them 
for their own use, and who will not part with them. 
The ' untransferable ' labourer — the labourer confined 
to a single occupation in a primitive society — saves 
certain things for himself, and needs them for himself, 
but he has no extra stock. He has no use, indeed, 
for it. In a society where there is no transferable 
labour, or need to hire, there is no motive, or almost 
none, for an accumulation of wages-paying capital 
which is to buy labour. The idea of it, simple as it 



ENGLISH POLITICAL ECONOMY 91 

seems to us, is one of a much later age, like that in 
which labour seeking to be hired is the commonest 
of things, and therefore the commodities needed for 
hiring it are among the commonest too. The means 
of buying, and the thing bought, inevitably in such a 
case as this grow together. 

As to the other kind of capital — that which aids 
labour, the co-operative kind — the scientific study of 
savage tribes, which is so peculiar a feature of the 
present world, has brought out its scantiness — I 
might say its meanness — almost more distinctly than 
it has brought out anything else. Sir John Lubbock, 
one of our greatest instructors on this matter, tells us 
the implements of the Australians are very simple. 
' They have no knowledge of pottery, and carry water 
in skins, or in vessels made of bark. They are quite 
ignorant of warm water, which strikes them with 
great amazement.' Some of them carry ' a small bag 
about the size of a moderate cabbage net, which is 
made by laying threads, loop within loop, somewhat 
in the manner of knitting used by our ladies to make 
purses. This bag the man carries loose upon his back 
by a small string, which passes over his head ; it 
generally contains a lump or two of paint and resin, 
some fish-hooks and lines, a shell or two out of which 
these hooks are made, a few points of darts, and their 



92 THE POSTULATES OF 

usual ornaments, which include the whole worldly 
treasure of the richest man among them.' All 
travellers say that rude nations have no stock of 
anything — no materials lying ready to be worked 
up, no idle tools waiting to be used ; the whole is a 
'hand-to-mouth' world. And this is but another way 
of saying that in such societies there is no capital of 
this kind to be transferred. We said just now that 
what we meant by transfer in such a case was a 
change in the sort of stock — the kind of materials, 
the kind of machines, the kind of living things to be 
used fastest and worn out quickest. But in these 
poverty-stricken early societies there is substantially 
no such stock at all. Every petty thing which there 
exists is already being used for all its petty purposes, 
and cannot be worked more quickly than it already 
is, or be worn out more rapidly than it is being worn 
out. 

Next, this capital must be concentrated in 'trades,' 
else it cannot be transferred from trade to trade for 
the sake of profit, and it must be worked by a single 
capitalist, or little group of capitalists, as the case 
may be, else the trade will not yield profit. And 
this, as has been explained, is not a universal feature 
of all times, but a special characteristic of somewhat 
advanced eras. And there must be the knowledge 



ENGLISH POLITICAL ECONOMY 93 

capable of employing that capital-a knowledge which 
altogether differs in different trades. Now-a-days the 
amount of the difference is a little disguised from us 
because we see people with < capital ' in various pur- 
suits—that is, who are traders in each and all of them. 
But such persons could not do this unless they were 
assisted by more specialised persons. The same 
principle governs political administration. Sir George 
Lewis, one of the most capable judges of it in our time, 
has observed—' The permanent officers of a depart- 
ment are the depositaries of its official tradition ; they 
are generally referred to by the political head of the 
office for information on questions of official prac- 
tice, and knowledge of this sort acquired in one 
department would be useless in another. If, for 
example, the chief clerk of the criminal department 
of the Home Office were to be transferred to the 
Foreign Office, or to the Admiralty, the special 
experience which he has acquired at the Home Office, 
and which is in daily requisition for the guidance of 
the Home Secretary, would be utterly valueless to 
the Foreign Secretary, or to the First Lord of the 
Admiralty. . . . Where a general superintendence is 
required, and assistance can be obtained from sub- 
ordinates, and where the chief qualifications are judg- 
ment, sagacity, and enlightened political opinions, 



94 THE POSTULATES OE 

such a change of offices is possible; but as you 
descend lower in the official scale, the speciality of 
functions increases. The duties must be performed 
in person, with little or no assistance, and there is 
consequently a necessity for special knowledge and 
experience. Hence the same person may be succes- 
sively at the head of the Home Office, the Foreign 
Office, the Colonial Office, and the Admiralty ; he 
may be successively President of the Board of Trade, 
and Chancellor of the Exchequer ; but to transfer an 
experienced clerk from one office to another would be 
like transferring a skilful naval officer to the army, or 
appointing a military engineer officer to command a 
ship of war.' And just so in mercantile business — 
there are certain general principles which are common 
to all kinds of it, and a person can be of considerable 
use in more than one kind if he understands these 
principles, and has the proper sort of mind. But the 
appearance of this common element is in commerce, 
as in politics, a sign of magnitude, and primitive 
commerce is all petty. In early tribes there is 
nothing but the special man — the clothier, the mason, 
the weapon-maker. Each craft tried to be, and very 
much was, a nrystery except to those who carried it 
on. The knowledge required for each was possessed 
by few, kept secret by these few, and nothing else 



ENGLISH POLITICAL ECONOMY 95 

was of use but this monopolised and often inherited 
acquirement ; there was no ' general ' business know- 
ledge. The idea of a general art of money-making is 
very modern ; almost everything ancient about it is 
individual and particular. Distance helped much in 
this kind of speciality. ' To the great fair of Stour- 
bridge,' in the south of England, there came, we are 
told, besides foreign products, ' the woolpacks, which 
then formed the riches of England, and were the 
envy of outer nations. The Cornish tin-mine sent its 
produce, stamped with the sign of the rich earl who 
bought the throne of the German Empire, or of the 
warlike prince who had won his spurs at Crecy, and 
captured the French king at Poitiers. . . . Thither 
came also salt from the springs of Worcestershire, as 
well as that which had been gathered under the 
summer sun from the salterns of the eastern coasts. 
Here, too, might be found lead from the mines of 
Derbyshire, and iron, either raw or manufactured, 
from the Sussex forges.' In an age when locomotion 
was tedious and costly, the mere distance of the 
separate seats of industry tended to make separate 
monopolies of them. Other difficulties of transfer- 
ring capital were aggravated by the rarity and the 
localisation of the knowledge necessary for carrying 
it on. 



96 THE POSTULATES OF 

Next, as we have seen, for the attraction of capital 
from trade to trade, there must be a money in which 
to calculate such profits, and a good money too. 
Many media of interchange which have been widely 
used in the world, and which are quite good enough 
for many purposes, are quite unfit for this. Cattle, 
for instance, which were certainly one of the first-used 
kinds of money, and which have been said to have 
been that most used, because what we call the primi- 
tive ages lasted so long, are quite inadequate. They 
are good enough for present bargains, but not for the 
forward and backward-looking calculations of profit 
and loss. The notation is not distinct enough for 
accuracy. One cow is not exactly like another ; a 
price list saying that so much raw cotton was worth 
20 cows, and so much cotton worth 30 cows, would 
not tell much for the purpose ; you could not be sure 
what cows you would have to give or you would get. 
There might be a ' loss by exchange ' which would 
annihilate profit. Until you get good coined money, 
calculations of profit and loss that could guide capital 
are impossible. 

Next, there must be the means of shifting 
'money,' which we analysed — the loan fund, the 
speculative fund, and the choice of employment by 
young capitalists, or some of them. The loan fund 



ENGLISH POLITICAL ECONOMY 97 

on a small scale is, as we have seen, a very early 
institution ; it begins in the primitive village almost 
as soon as any kind of trade begins at all, and a per- 
ception of its enormous value is one of the earliest 
pieces of true economical speculation. ' In the 
Athenian laws,' says Demosthenes, ' are many well- 
devised securities for the protection of the creditor ; 
for commerce proceeds not from the borrowers, but 
from the lenders, without whom no vessel, no navi- 
gator, no traveller could depart from port.' Even in 
these days we could hardly put the value of discounts 
and trade loans higher. But though the loan fund 
beo-ins so early in civilisation, and is prized so soon, 
it grows very slowly ; the full development, modern 
banking such as we are familiar with in England, 
stops where the English language ceases to be spoken. 
The peculiarity of that system is that it utilises all 
the petty cash of private persons down nearly to the 
end of the middle class. This is lodged with bankers 
on running account, and though incessantly changing 
in distribution, the quantity is nearly fixed on the 
whole, for most of what one person pays out others 
almost directly pay in ; and therefore it is so much 
added to the loan fund which bankers have to use, 
though, as credit is always precarious, they can, of 
course, only use it with caution. Besides this. 



98 THE P0S1ULATES OF 

English bankers have most of the permanent savings 
of little persons deposited with them, and so have an 
unexampled power of ready lending. But ages of 
diffused confidence are necessary to establish such a 
system, and peculiar circumstances in the bankiDg 
history of England, and of Scotland still more, have 
favoured it. Our insular position exempting us from 
war, and enabling our free institutions to develop 
both quietly and effectually, is at the very root of it. 
But here until within a hundred years there was no 
such concentration of minute moneys, no such incre- 
ment to the loan fund, and abroad there is nothing 
equal to it now. Taking history as a whole, it is a rare 
and special phenomenon. Mostly the loan fund of a 
country consists of such parts of its moneyed savings 
as those who have saved them are able to lend for 
themselves. As countries advance banking slowly 
begins, and some persons who are believed to have 
much, are entrusted with the money of others, and 
become a sort of middlemen to put it out ; but almost 
everywhere the loan fund is very small to our English 
notions. It is a far less efficient instrument for con- 
veying capital from trade to trade everywhere else 
than here ; in very many countries it is only inci- 
pient ; in some it can hardly be said to exist at all. 
The speculative fund, as I have called it, has also 



ENGLISH POLITICAL ECONOMY 99 

but a bounded range of action. The number of 
persons who have large moneyed savings who are 
willing to invest them in new things is in England 
considerable, but in most countries it is small. Such 
persons fear the unknown ; they have a good deal to 
lose, and they do not wish to lose it. In most com- 
munities there is not even the beginning of a settled 
opinion to tell them which undertaking is likely to 
be good, and which bad. In the industrial history 
of most countries, the most marked feature is an 
extreme monotony; enterprises are few; the same 
things continue for ages to be done in the same way. 
The data which should guide original minds are few 
and insufficient; there was not such a thing as a 
' price list ' in any ancient community. No Athenian 
merchant could, by looking over a file of figures, see 
which commodities were much lower in their average 
price, and which therefore might be advantageously 
bought with money that he could not employ in his 
usual trade. Even for so simple a speculation as 
this, according to our present notions, the data did 
not exist, and for more complex ones the knowledge 
was either altogether wanting or confined to a few 
persons, none of whom might have the idle capital. 
The speculative fund does not become a force of first- 
rate magnitude till we have in the same community 

h 2 



100 THE POSTULATES OP 

a great accumulation of spare capital, and a wide dif- 
fusion of sound trade knowledge, — and then it does. 

The free choice by young men of the mode in 
which they will invest the capital which they possess 
is also in the early times of trade much hindered and 
cramped, and it only gains anything near the effective 
influence which it now has with us in quite late 
times. For a long period of industrial history special 
associations called ' guilds ' prohibited it ; these kept 
each trade apart, and prevented capital from going 
from one to the other. They even kept the trade of 
city A quite apart from the same trade in city B ; 
they would not let capital or labour flow from one to 
the other. These restrictive hedges grew up natu- 
rally, and there was no great movement to throw 
them down. They strengthened what was already 
strong, and that which was weak made no protest. 
The general ignorance of trade matters in such 
communities made it seem quite reasonable to keep 
each trade to those who understood it ; other people 
going into it would, it was imagined, only do it ill, 
lose their money, and hurt those who did it well by 
a pernicious competition. We now know that this 
is a great error, that such guilds did far more harm 
than good, that only experiment can show where 
capital will answer in trade, that it is from the out- 



ENGLISH POLITICAL ECONOMY 101 

sider that the best improvements commonly come. 
But these things, which are now commonplaces after 
experience, were paradoxes before it. The first de- 
duction of the uninstructed mind was and is the 
other way. Nor is it dispelled by mere argument. 
Civilisation must increase, trade ideas must grow 
and spread, and idle capital waiting to change must 
accumulate. Till these things have happened, the 
free choice by a young man how he will invest his 
capital is not the common rule, but the rare excep- 
tion ; it is not what mostly happens, though it may 
be resisted, but what happens only where it is 
unusually helped. Even where there is no formal 
guild, the circumstances which have elsewhere created 
so many, create an informal monopoly, mostly much 
stronger than any force which strives to infringe it. 

None, therefore, of the three instruments which 
now convey capital from employment to employment 
can in early times be relied on for doing so, even 
when that capital exists, and when some labour at 
least is available to be employed by it; neither the 
loan fund, nor the speculative fund, nor the free 
choice of a trade by young men, is then a commonly 
predominant power; nor do the whole three taken 
together commonly come to much in comparison 
with the forces opposed to them. 



102 THE POSTULATES OF 

And even if their intrinsic strength had been far 
greater than it was, it would often have been success- 
fully impeded by the want of a final condition to the 
free transfer of capital, of which I have not spoken 
yet. This is a political condition. We have seen 
that for the free transfer of labour from employment 
to employment a strong government is necessary. 
The rules regulating the inheritance of trades and 
the fixed separations of labour were really contri- 
vances to obtain some part of the results of the divi- 
sion of labour, when for want of an effectual govern- 
ment, punishing quarrels and preserving life, free 
competition and movement in labour were impos- 
sible. And this same effectual government is equally 
necessary, as need not be explained, for the free 
migration of money. That migration needs peace 
and order quite as obviously as the migration of 
labour ; and those who understand the delicacy of 
the process will need no proof of it. But though a 
strong government is required, something more is 
wanted too ; for the movement of capital we need a 
fair government. If capital is to be tempted from 
trade to trade by the prospect of high profits, it 
must be allowed to keep those profits when they 
have been made. But the primitive notion of taxa- 
tion is that when a government sees much money it 



ENGLISH POLITICAL ECONOMY 103 

should take some of it, and that if it sees more 
money it should take more of it. Adam Smith laid 
down, as a fundamental canon, that taxes ought to 
be levied at the time when, and in the manner in 
which, it is most easy for the taxpayer to pay them. 
But the primitive rule is to take them when and 
how it is most easy to find and seize them. Under 
governments with that rule persons who are doing 
well shrink from showing that they are doing well ; 
those who are making money refuse to enjoy them- 
selves, and will show none of the natural signs of that 
money, lest the tax-gatherer should appear and should 
take as much as he likes of it. A socialist speaker 
once spoke of a ' healthy habit of confiscation,' and 
that habit has been much diffused over the world. 
Wherever it exists it is sure exceedingly to impede 
the movements of capital, and where it abounds to 
prevent them. 

These reasonings give us a conception of a ' pre- 
economic ' era when the fundamental postulates of 
Political Economy, of which we have spoken, were 
not realised, and show us that the beginnings of 
all wealth were made in that era. Primitive capi- 
tal accumulated in the hands of men who could 
neither move it nor themselves — who really never 
thought of doing either — to whom either would often 



104 THE POSTULATES OF 

have seemed monstrous if they could have thought 
of it, and in whose case either was still more often 
prevented by insuperable difficulties. And this 
should warn us not to trust the historical retro- 
spect of economists, merely because we see and 
know that their reasonings on the events and causes 
of the present world are right. Early times bad 
different events and different causes. Reasoners like 
economists, and there are many others like them, 
are apt to modify the famous saying of Plunket ; 
they turn history not into an old almanac, but into 
a new one. They make what happens now to have 
happened always, according to the same course of 
time. 

And these reasonings also enable us to explain 
what is so common in all writing concerning those 
early and pre-economic times. One of the com- 
monest phenomena of primitive trade is 'fixed' prices, 
and the natural inquiry of everyone who is trained 
in our Political Economy is, how could these prices 
be maintained ? They seem impossible according to 
the teaching which he has received, and yet they 
were maintained for ages ; they lasted longer than 
many things now-a-days which we do not reckon 
short-ln&ed. One explanation is that they were 
maintained by custom ; but this fails at the crisis, 



ENGLISH POLITICAL ECONOMY 105 

for the question is, how could the custom be main- 
tained ? The unchanging price could not always be 
right under changing circumstances. Why did not 
capital and labour flow into the trades which at the 
time had more than their 'natural' price, desert 
those which had less, and so disturb the first with 
a plethora, and the second with a scarcity? The 
answer we now see is that what we have been used 
to call ' natural ' is not the first but the second nature 
of men ; that there were ages when capital and labour 
could not migrate, when trade was very much one of 
monopoly against monopoly. And in such a society, 
fixing a price is a primitive way of doing what in 
after ages we do as far as we can ; it is a mode of 
regulating the monopoly— of preventing the inces- 
sant dissensions which in all ages arise about what 
is a just price and what is not, when there is no 
competition to settle that price. The way in which 
< custom ' settles prices, how it gradually arrives at 
what is right and proper, or at least at what is en- 
durable, one cannot well say ; probably many in- 
cipient customary prices break down before the one 
which suits and lasts is stumbled upon. But defects 
of this rule-of-thumb method are no reproach to 
primitive times. When we try to regulate monopolies 
ourselves we have arrived at nothing better. The 



106 THE POSTULATES OF 

fares of railways — the fixed prices at which these 
great monopolies carry passengers — are as accidental, 
as much the rough results of inconclusive experi- 
ments, as any prices can be. 

And this long analysis proves so plainly, that it 
would be tedious to show it again, that the free 
movement of capital from employment to employ- 
ment within a nation, and the consequent strong 
tendency to an equality of profits there, are ideals 
daily becoming truer as competition increases and 
capital grows, that all the hindrances are gradually 
diminishing, all the incentives enhancing, and all 
the instruments becoming keener, quicker, and more 
powerful. 

But it is most important to observe that this 
ideal of English Political Economy is not like most 
of its ideals, an ultimate one. In fact the ' great 
commerce' has already gone beyond it; we can 
already distinctly foresee a time when that commerce 
will have merged it in something larger. English 
Political Economy, as we know, says that capital 
fluctuates from trade to trade within a nation, and it 
adds that capital will not as a rule migrate beyond 
that nation. * Feelings,' says Eicardo, ' which I 
should be sorry to see weakened, induced most men 
of property to be satisfied with a low rate of r>rofit& 



ENGLISH POLITICAL ECONOMY 107 

in their own country, rather than seek a more ad- 
vantageous employment for their wealth in foreign 
nations.' But these feelings are being weakened 
every day. A class of cosmopolitan capitalists has 
grown up which scarcely feels them at all. When 
Ricardo wrote, trade of the modern magnitude was 
new : long wars had separated most nations from 
most others, and especially had isolated England in 
habit and in feeling. Ricardo framed, and others 
have continued, a theory of foreign trade in which 
each nation is bounded by a ring-fence, through 
which capital cannot pass in or out. But the present 
state of things is far less simple, and much of that 
theory must be remodelled. The truth is that the 
three great instruments for transferring capital 
within a nation, whose operation we have analysed, 
have begun to operate on the largest scale between 
nations. The ' loan fund,' the first and most power- 
ful of these, does so most strikingly. Whenever the 
English money market is bare of cash it can at once 
obtain it by raising the rate of interest. That is to 
say, it can borrow money to the extent of millions at 
any moment to meet its occasions : or what is the 
same thing, can call in loans of its own. Other 
nations can do so too, each in proportion to its credit 
and its wealth — though none so quickly as England, 



108 THE POSTULATES OP 

on account of our superiority in these things. A 
cosmopolitan loan fund exists, which runs every- 
where as it is wanted, and as the rate of interest 
tempts it. 

A new commodity, one of the greatest growths 
of recent times, is used to aid these operations. The 
' securities ' of all well-known countries, their na- 
tional debts, their railway shares, and so on (a kind 
of properties peculiar to the last two centuries, and 
increasing now most rapidly), are dealt in through 
Europe on every Stock Exchange. If the rate of 
interest rises in any one country the price of such 
securities falls ; foreign countries come in and buy 
them; they are sent abroad and their purchase-money 
comes here. Such interest-bearing documents are 
a sort of national ' notes of hand ' which a country 
puts out when it is poor, and buys back when it is 
rich. 

The mode in which the indemnity from France 
to Germany was paid is the most striking instance 
of this which ever occurred in the world. The sum 
of 200,000,000/. was the largest ever paid by one 
set of persons to another, upon a single contract, 
since the system of payments began. Without a 
great lending apparatus such an operation could not 
have been effected. The resources of one nation, as 



ENGLISH POLITICAL ECONOMY 109 

nations now are, would not have been equal to it. 
In fact it was the international loan fund which did 
the business. ' We may say,' M. Say states in his 
official report, ' that all the great banking-houses of 
Europe have concurred in this operation, and it is 
sufficient to show the extent and the magnitude of it 
to say that the number of houses which signed or 
concurred in the arrangement was fifty-five, and 
that many of them represented syndicates of bankers, 
so that the actual number concerned was far more 
considerable.' ' The concentration,' he adds, ' of the 
effects of all the banks of Europe produced results of 
an unhoped-for magnitude. All other business of a 
similar nature was almost suspended for a time, while 
the capital of all the private banks, and of all their 
friends, co-operated in the success of the French 
loans, and in the transmission of the money lent 
from country to country. This was a new fact 
in the economic history of Europe, and we should 
attach peculiar importance to it.' The magnitude of 
it as a single transaction was indeed very new ; but 
it is only a magnificent instance of what incessantly 
happens ; and the commonness of similar small trans- 
actions, and the amount of them when added to- 
gether, are even more remarkable, and even more 
important than the size of this one; and similar 



110 THE POSTULATES OF 

operations of the international c loan fund ' are going 
on constantly, though on a far less scale. 

We must not, however, fancy that this puts all 
countries on a level, as far as capital is concerned, 
because it can be attracted from one to another. 
On the contrary, there will always tend to be a fixed 
difference between two kinds of countries. The old 
country, where capital accumulates, will always, on an 
average, have it cheaper than the new country, which 
has saved little, and can employ any quantity. The 
Americans in the Mississippi Valley are naturally a 
borrowing community, and the English at home are 
naturally lenders. And the rate of interest in the 
lending country will of course be less than that in 
the borrowing country. We see approaches — distant 
approaches even yet, but still distinct approaches — 
to a time at which all civilised and industrial coun- 
tries will be able to obtain a proportionate share of 
the international loan fund, and will differ only in the 
rate they have to pay for it. 

The ' speculative fund ' is also becoming common 
to all countries, and it is the English who have 
taken the lead, because they have more money, more 
practical adaptation to circumstances, and more in- 
dustrial courage than other nations. Some nations, 
no doubt, have as much or more of one of these 



ENGLISH POLITICAL ECONOMY 111 

singly, but none have as much of the efficiency which 
is the combined result of all three. The way in 
which continental railways — the early ones espe- 
cially, when the idea was novel — were made by Eng- 
lish contractors is an example of this. When Mr. 
Brassey, the greatest of them, was making the line 
from Turin to No vara, for the Italian Government, 
Count Cavour sent one morning for his agent, and 
said, ' We are in a difficulty : the public have sub- 
scribed for very few shares, but I am determined to 
carry out the line, and I want to know if Mr. 
Brassey will take half the deficiency if the Italian 
Government will take the other half.' Mr. Brassey 
did so, and thus the railway was made. This is the 
international speculative fund in action, and the 
world is filled with its triumphs. 

So large, so daring, and indeed often so reckless 
is this speculative fund, that some persons have ima- 
gined that there was nothing which would seem 
absurd to it. A very little while ago, a scheme — a 
fraudulent scheme, no doubt — was gravely brought 
out, for a ship railway over the Isthmus of Panama ; 
the ships were to be lifted upon the line on one side, 
and lifted off and returned to the ocean on the other. 
But even the 'speculative fund' would not stand that, 
and the scheme collapsed. Yet the caricature shows 



112 THE POSTULATES OF 

the reality ; we may use it to remind ourselves how 
mobile this sort of money is, and how it runs from 
country to country like beads of quicksilver. 

Young men also now transfer their capital from 
country to country with a rapidity formerly unknown. 
In Europe perhaps the Germans are most eminent in 
so doing. Their better school education, their better- 
trained habits of learning' modern languages, and their 
readiness to bear the many privations of a residence 
among foreigners, have gained them a prominence 
certainly over the English and the French, perhaps 
above all other nations. But taking the world as a 
whole the English have a vast superiority. They 
have more capital to transfer, and their language is 
the language of 'the great commerce' everywhere, and 
tends to become so more and more. More transac- 
tions of the ' cosmopolitan speculative fund ' are ar- 
ranged in English, probably, than in all the other 
languages of the world put together ; not only 
because of the wealth and influence of mere England, 
though that is not small, but because of the wealth 
and influence of the other States which speak that 
language also, the United States, our colonies, and 
British India, which uses it mostly for its largest 
trade. The number of Euglish commercial houses 
all over the world is immense, and of American very 



ENGLISH POLITICAL ECONOMY 113 

many, and yearly a vast number of young English- 
men are sent out to join them. The pay is high, the 
prospect good, and insular as we are thought to be 
(and in some respects we are so most mischievously), 
the emigration of young men with English capital, 
and to manage English capital, is one of the great 
instruments of world-wide trade and one of the 
binding forces of the future. 

In this way the same instruments which diffused 
capital through a nation are gradually diffusing it 
amonsr nations. And the effect of this will be in the 
end much to simplify the problems of international 
trade. But for the present, as is commonly the case 
with incipient causes whose effect is incomplete, it 
complicates all it touches. We still have to consider, 
after the manner Bicardo began, international trade 
as one between two or more limits which do not in- 
terchange their compound capitals, and then to con- 
sider how much the conclusions so drawn are modi- 
fied by new circumstances and new causes. And 
as, even when conceived in Kicardo's comparatively 
simple manner, international trade (as Mr. Mill 
justly said, and as the readers of his discussion 
on it well know) is an excessively difficult subject 
of inquiry, we may expect to find many parts of 
it very hard indeed to reduce to anything like 



114 ENGLISH POLITICAL ECONOMY 

simplicity when new encumbrances are added. The 
popular discussion of the subject tends to conceal its 
difficulties, and indeed is mostly conducted by those 
who do not see them. Nothing is commoner than 
to see statements on it put forth as axioms which it 
would take half a book really to prove or disprove. 
But with the soundness or unsoundness of such 
arguments I have at present nothing to do. The 
object of these papers is not to examine the edifice 
of our English Political Economy, but to define its 
basis. Nothing but unreality can come of it till we 
know when and how far its first assertions are true 
in matter of fact 3 and when and how far they are not. 



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